Nonalcoholic fatty liver disease (NAFLD) is a chronic disease with a histological spectrum ranging from steatosis alone, to nonalcoholic steatohepatitis (NASH). The latter is associated with an increased risk for progression to cirrhosis. Ceramides are a lipid species that exert biological effects through cellular proliferation, differentiation, and cell death, and interact with several pathways involved in insulin resistance, oxidative stress, inflammation, and apoptosis, all of which are linked to NAFLD. We propose a mechanism through which ceramides contribute to the development of NAFLD and progression to NASH, due in part to second messenger effects via tumor necrosis factor (TNF)-α. A better understanding of the role of ceramides in steatohepatitis has both diagnostic and therapeutic implications for the treatment of fatty liver disease.