Fatty liver is the most common type of liver disease, affecting nearly one third of the U.S. population and more than half a billion people worldwide. Abnormalities in endoplasmic reticulum (ER) calcium handling and mitochondrial function each have been implicated in abnormal lipid droplet formation. Here we show that the type 1 isoform of the inositol 1,4,5‐trisphosphate receptor (InsP3R1) specifically links ER calcium release to mitochondrial calcium signaling and lipid droplet formation in hepatocytes. Moreover, liver‐specific InsP3R1 knockout mice have impaired mitochondrial calcium signaling, decreased hepatic triglycerides, and reduced lipid droplet formation and are resistant to the development of fatty liver. Patients with nonalcoholic steatohepatitis, the most malignant form of fatty liver, have increased hepatic expression of InsP3R1, and the extent of ER–mitochondrial colocalization correlates with the degree of steatosis in human liver biopsies. Conclusion: InsP3R1 plays a central role in lipid droplet formation in hepatocytes, and the data suggest that it is involved in the development of human fatty liver disease. (Hepatology Communications 2017;1:23–35)