Diminished hepatic insulin clearance (HIC) is observed in obese adults and is presumed to be mediated by fatty liver. However, few reports have examined HIC in Chinese children with metabolic (dysfunction)-associated fatty liver disease (MAFLD). This study aimed to investigate the correlation between HIC, insulin sensitivity and β-cell function in obese Chinese children with MAFLD. In total, 204 obese children (74 MAFLD) aged 4-17 years were enrolled into this study. HIC, insulin sensitivity and β-cell function were calculated using the oral glucose tolerance test (1.75 g/kg body weight). Correlation analyses between the HIC and clinical variables were performed using Pearson's product-moment correlation coefficients. HIC and glucose homeostasis were assessed in a high-fat diet mouse model, and liver samples were collected for molecular analysis. Obese children with MAFLD exhibited significantly lower HIC (AUCC-peptide/insulin ratio, p = 0.0019), higher insulin resistance (homeostatic model assessment of insulin resistance, p = 0.002), and increased compensatory β-cell function (homeostatic model assessment-β, p = 0.046) than obese children without liver involvement. Notably, HIC was negatively correlated with insulin sensitivity (r = -0.5035, p < 0.0001) and β-cell function (r = -0.4576, p < 0.0001). However, pancreatic β-cell dysfunction (p = 0.046) was accompanied by future reduced HIC (p = 0.034) in children with MAFLD in prediabetes. In a high-fat diet mouse model, MAFLD mice showed a 50% reduction in insulin-degrading enzyme expression, consistent with the observed decrease in HIC. A lower HIC may offload pancreatic β-cells at an early stage. However, obese children with MAFLD are at risk of developing diabetes, and preventive efforts should be prioritized.