Non-alcoholic steatohepatitis (NASH) is an increasingly prevalent liver pathology that can progress from non-alcoholic fatty liver disease (NAFLD), and it is a leading cause of cirrhosis and hepatocellular carcinoma. There is currently no pharmacological therapy for NASH. Defective lysosome-mediated protein degradation is a key process that underlies steatohepatitis and a well-recognized drug target in a variety of diseases; however, whether it can serve as a therapeutic target for NAFLD and NASH remains unknown. Here we report that transmembrane BAX inhibitor motif-containing 1 (TMBIM1) is an effective suppressor of steatohepatitis and a previously unknown regulator of the multivesicular body (MVB)-lysosomal pathway. Tmbim1 expression in hepatocytes substantially inhibited high-fat diet–induced insulin resistance, hepatic steatosis and inflammation in mice. Mechanistically, Tmbim1 promoted the lysosomal degradation of toll-like receptor 4 by cooperating with the ESCRT endosomal sorting complex to facilitate MVB formation, and the ubiquitination of Tmbim1 by the E3 ubiquitin ligase Nedd4l was required for this process. We also found that overexpression of Tmbim1 in the liver effectively inhibited a severe form of NAFLD in mice and NASH progression in monkeys. Taken together, these findings could lead to the development of promising strategies to treat NASH by targeting MVB regulators to properly orchestrate the lysosome-mediated protein degradation of key mediators of the disease.