Nonalcoholic fatty liver disease (NAFLD) is an independent risk factor for advanced liver disease, type 2 diabetes (T2DM), and cardiovascular diseases. The prevalence of NAFLD in the general population is around 30 %, but it is up to three times higher in those with T2DM. Among people with obesity and T2DM, the NAFLD epidemic also is worsening. Therefore, it is important to identify early metabolic alterations and to prevent these diseases and their progression. In this review, we analyze the pathophysiologic mechanisms leading to NAFLD, particularly, those common to T2DM, such as liver and muscle insulin resistance. However, it is mainly adipose tissue insulin resistance that results in increased hepatic de novo lipogenesis, inflammation, and lipotoxicity. Although genetics predispose to NAFLD, an unhealthy lifestyle, including high-fat/high-sugar diets and low physical activity, increases the risk. In addition, alterations in gut microbiota and environmental chemical agents, acting as endocrine disruptors, may play a role.