Adiponectin has recently been shown to be a promising candidate for the treatment of obesity-associated metabolic syndromes. Replenishment of recombinant adiponectin in mice can decrease hyperglycemia, reverse insulin resistance, and cause sustained weight loss without affecting food intake. Here we report its potential roles in alcoholic and nonalcoholic fatty liver diseases in mice. Circulating concentrations of adiponectin decreased significantly following chronic consumption of high-fat ethanol-containing food. Delivery of recombinant adiponectin into these mice dramatically alleviated hepatomegaly and steatosis (fatty liver) and also significantly attenuated inflammation and the elevated levels of serum alanine aminotransferase. These therapeutic effects resulted partly from the ability of adiponectin to increase carnitine palmitoyltransferase I activity and enhance hepatic fatty acid oxidation, while it decreased the activities of two key enzymes involved in fatty acid synthesis, including acetyl-CoA carboxylase and fatty acid synthase. Furthermore, adiponectin treatment could suppress the hepatic production of TNF-alpha and plasma concentrations of this proinflammatory cytokine. Adiponectin was also effective in ameliorating hepatomegaly, steatosis, and alanine aminotransferase abnormality associated with nonalcoholic obese, ob/ob mice. These results demonstrate a novel mechanism of adiponectin action and suggest a potential clinical application of adiponectin and its agonists in the treatment of liver diseases.