Alcohol’s impairment of both hepatic lipid metabolism and insulin resistance (IR) are key drivers of alcoholic steatosis, the initial stage of alcoholic liver disease (ALD). Pharmacologic reduction of lipotoxic ceramide prevents alcoholic steatosis and glucose intolerance in mice, but potential off-target effects limit its strategic utility. Here, we employed a hepatic-specific acid ceramidase (ASAH) overexpression model to reduce hepatic ceramides in a Lieber-DeCarli model of experimental alcoholic steatosis. We examined effects of alcohol on hepatic lipid metabolism, body composition, energy homeostasis, and insulin sensitivity as measured by hyperinsulinemic-euglycemic clamp. Our results demonstrate that hepatic ceramide reduction ameliorates the effects of alcohol on hepatic lipid droplet (LD) accumulation by promoting VLDL secretion and lipophagy, the latter of which involves ceramide cross-talk between the lysosomal and LD compartments. We additionally demonstrate that hepatic ceramide reduction prevents alcohol’s inhibition of hepatic insulin signaling. These effects on the liver are associated with a reduction in oxidative stress markers and are relevant to humans, as we observe peri- LD ASAH expression in human ALD. Together, our results suggest a potential role for hepatic ceramide inhibition in preventing ALD.