Nonalcoholic steatohepatitis (NASH) is characterized by steatosis, inflammation, and oxidative stress. To investigate whether the transcription factor CCAAT/Enhancer binding protein (C/EBPβ) is involved in the development of NASH, C57BL/6J wild‐type (WT) or C/EBPβ knockout (C/EBPβ−/−) mice were fed either a methionine and choline deficient (MCD) diet or standard chow. These WT mice fed a MCD diet for 4 weeks showed a 2‐ to 3‐fold increase in liver C/EBPβ messenger RNA and protein, along with increased expression of lipogenic genes peroxisome proliferators‐activated receptor γ and Fas. WT mice also showed increased levels of the endoplasmic reticulum stress pathway proteins phosphorylated eukaryotic translation initiation factor α, phosphorylated pancreatic endoplasmic reticulum kinase, and C/EBP homologous protein, along with inflammatory markers phosphorylated nuclear factor κB and phosphorylated C‐jun N‐terminal kinase compared to chow‐fed controls. Cytochrome P450 2E1 protein and acetyl coA oxidase messenger RNA involved in hepatic lipid peroxidation were also markedly increased in WT MCD diet‐fed group. In contrast, C/EBPβ−/− mice fed a MCD diet showed a 60% reduction in hepatic triglyceride accumulation and decreased liver injury as evidenced by reduced serum alanine aminotransferase and aspartate aminotransferase levels, and by H&E staining. Immunoblots and real‐time qPCR data revealed a significant reduction in expression of stress related proteins and lipogenic genes in MCD diet‐fed C/EBPβ−/− mice. Furthermore, circulating TNFα and expression of acute phase response proteins CRP and SAP were significantly lower in C/EBPβ−/− mice compared to WT mice. Conversely, C/EBPβ over‐expression in livers of WT mice increased steatosis, nuclear factor‐κB, and endoplasmic reticulum stress, similar to MCD diet‐fed mice. Conclusion: Taken together, these data suggest a previously unappreciated molecular link between C/EBPβ, hepatic steatosis and inflammation and suggest that increased C/EBPβ expression may be an important factor underlying events leading to NASH. (HEPATOLOGY 2007;45:1108–1117.)