Obesity and adiponectin depletion have been associated with the occurrence of nonalcoholic fatty liver disease (NAFLD). The goal of this study was to identify the relationship between weight gain, adiponectin signaling, and development of nonalcoholic steatohepatitis (NASH) in an obese, diabetic mouse model. Leptin‐receptor deficient (Lepr^db/db) and C57BL/6 mice were administered a diet high in unsaturated fat (HF) (61%) or normal chow for 5 or 10 weeks. Liver histology was evaluated using steatosis, inflammation, and ballooning scores. Serum, adipose tissue, and liver were analyzed for changes in metabolic parameters, messenger RNA (mRNA), and protein levels. Lepr^db/db HF mice developed marked obesity, hepatic steatosis, and more than 50% progressed to NASH at each timepoint. Serum adiponectin level demonstrated a strong inverse relationship with body mass (r = −0.82; P < 0.0001) and adiponectin level was an independent predictor of NASH (13.6 μg/mL; P < 0.05; area under the receiver operating curve (AUROC) = 0.84). White adipose tissue of NASH mice was characterized by increased expression of genes linked to oxidative stress, macrophage infiltration, reduced adiponectin, and impaired lipid metabolism. HF lepr ^db/db NASH mice exhibited diminished hepatic adiponectin signaling evidenced by reduced levels of adiponectin receptor‐2, inactivation of adenosine monophosphate activated protein kinase (AMPK), and decreased expression of genes involved in mitochondrial biogenesis and β‐oxidation (Cox4, Nrf1, Pgc1α, Pgc1β and Tfam). In contrast, recombinant adiponectin administration up‐regulated the expression of mitochondrial genes in AML‐12 hepatocytes, with or without lipid‐loading. Conclusion: Lepr^db/db mice fed a diet high in unsaturated fat develop weight gain and NASH through adiponectin depletion, which is associated with adipose tissue inflammation and hepatic mitochondrial dysfunction. We propose that this murine model of NASH may provide novel insights into the mechanism for development of human NASH. (Hepatology 2014;60:133–145)