Nonalcoholic fatty liver disease (NAFLD) is considered the most common liver disorder in the Western world. It is commonly associated with insulin resistance, obesity, dyslipidaemia, type 2 diabetes mellitus (T2DM) and cardiovascular disease. Nonalcoholic steatohepatitis (NASH) is characterized by steatosis with necroinflammation and eventual fibrosis, which can lead to end-stage liver disease and hepatocellular carcinoma. Its pathogenesis is complex, and involves a state of 'lipotoxicity' in which insulin resistance, with increased free fatty acid release from adipose tissue to the liver, play a key role in the onset of a 'lipotoxic liver disease' and its progression to NASH. The diagnosis of NASH is challenging, as most affected patients are symptom free and the role of routine screening is not clearly established. A complete medical history is important to rule out other causes of fatty liver disease (alcohol abuse, medications, other). Plasma aminotransferase levels and liver ultrasound are helpful in the diagnosis of NAFLD/NASH, but a liver biopsy is often required for a definitive diagnosis. However, there is an active search for plasma biomarkers and imaging techniques that may non-invasively aid in the diagnosis. The treatment of NASH requires a multifaceted approach. The goal is to reverse obesity-associated lipotoxicity and insulin resistance via lifestyle intervention. Although there is no pharmacological agent approved for the treatment of NAFLD, vitamin E (in patients without T2DM) and the thiazolidinedione pioglitazone (in patients with and without T2DM) have shown the most consistent results in randomized controlled trials. This review concentrates on our current understanding of the disease, with a focus on the existing therapeutic approaches and potential future pharmacological developments for NAFLD and NASH.