Fatty liver disease is one of most prevalent metabolic liver diseases, which includes alcoholic (ASH) and nonalcoholic steatohepatitis (NASH). Its initial stage is characterized by fat accumulation in the liver, that can progress to steatohepatitis, a stage of the disease in which steatosis is accompanied by inflammation, hepatocellular death, oxidative stress and fibrosis. Recent evidence in experimental models as well as in patients with steatohepatitis have uncovered a role for cholesterol and sphingolipids, particularly ceramide, in the transition from steatosis to steatohepatitis, insulin resistance and hence disease progression. Cholesterol accumulation and its trafficking to mitochondria sensitizes fatty liver to subsequent hits including inflammatory cytokines, such as TNF/Fas, in a pathway involving ceramide generation by acidic sphingomyelinase (ASMase). Thus, targeting both cholesterol and/or ASMase may represent a novel therapeutic approach of relevance in ASH and NASH, two of the most common forms of liver diseases worldwide.