Non-alcoholic fatty liver disease (NAFLD) contributes to impaired glucose tolerance, leading to type 2 diabetes (T2D); however, the precise mechanisms and target molecules that are involved remain unclear. Activating transcription factor 3 (ATF3) is associated with β-cell dysfunction that is induced by severe stress signals in T2D. We aimed to explore the exact functional role of ATF3 as a mechanistic link between hepatic steatosis and T2D development. Zucker diabetic fatty (ZDF) rats were utilized for animal experiments. An in vivo-jetPEI siRNA delivery system against ATF3 was used for loss-of-function experiments. We analyzed the baseline cross-sectional data derived from the biopsy-proven NAFLD registry (n=322). Human sera and liver tissues were obtained from 43 patients with biopsy-proven NAFLD and from seven healthy participants. ATF3 was highly expressed in the livers of ZDF rats and in human participants with NAFLD and/or T2D. Insulin resistance and hepatic steatosis were associated with increased ATF3 expression and decreased fatty acid oxidation via mitochondrial dysfunction and were attenuated by in vivo ATF3 silencing. Knockdown of ATF3 also ameliorated glucose intolerance, impaired insulin action, and inflammatory responses in ZDF rats. In patients with NAFLD and/or T2D, a significant positive correlation was observed between hepatic ATF3 expression and surrogate markers of T2D, mitochondrial dysfunction, and macrophage infiltration. Increased hepatic ATF3 expression is closely associated with hepatic steatosis and incident T2D; therefore, ATF3 may serve as a potential therapeutic target for NAFLD and hepatic steatosis-induced T2D. Hepatic activating transcription factor 3 (ATF3) may play an important role in oxidative stress-mediated hepatic steatosis and the development of type 2 diabetes (T2D) in a Zucker diabetic fatty (ZDF) rat model and in human patients with non-alcoholic fatty liver disease (NAFLD). Therefore, ATF3 may be a useful biomarker for predicting the progression of NAFLD and the development of T2D. Furthermore, given the significant association between hepatic ATF3 expression and both hepatic steatosis and impaired glucose homeostasis, in vivo ATF3 silencing may be a potential central strategy for preventing and managing NAFLD and T2D.