Myotonic Dystrophy type 1 (DM1), a highly prevalent form of muscular dystrophy, is caused by (CTG)n repeat expansion in the DMPK gene. Much of DM1 research has focused on the effects within the muscle and neurological tissues; however, DM1 patients also suffer from various metabolic and liver dysfunctions such as increased susceptibility to metabolic dysfunction-associated fatty liver disease (MAFLD) and heightened sensitivity to certain drugs. Here, we generated a liver-specific DM1 mouse model that reproduces molecular and pathological features of the disease, including susceptibility to MAFLD and reduced capacity to metabolize specific analgesics and muscle relaxants. Expression of CUG-expanded (CUG)exp repeat RNA within hepatocytes sequestered muscleblind-like proteins and triggered widespread gene expression and RNA processing defects. Mechanistically, we demonstrate that increased expression and alternative splicing of acetyl-CoA carboxylase 1 drives excessive lipid accumulation in DM1 livers, which is exacerbated by high-fat, high-sugar diets. Together, these findings reveal that (CUG)exp RNA toxicity disrupts normal hepatic functions, predisposing DM1 livers to injury, MAFLD, and drug clearance pathologies that may jeopardize the health of affected individuals and complicate their treatment.