Alpha-1 antitrypsin deficiency (AATD) is caused by a single mutation in the SERPINA1 gene, which culminates in the accumulation of misfolded alpha-1 antitrypsin (ZAAT) within the endoplasmic reticulum (ER) of hepatocytes. AATD is associated with liver disease resulting from hepatocyte injury due to ZAAT-mediated toxic gain-of-function and ER stress. There is evidence of mitochondrial damage in AATD-mediated liver disease; however, the mechanism by which hepatocyte retention of aggregated ZAAT leads to mitochondrial injury is unknown. Previous studies have shown that ER stress is associated with both high concentrations of fatty acids and mitochondrial dysfunction in hepatocytes. Using a human AAT transgenic mouse model and hepatocyte cell lines, we show abnormal mitochondrial morphology and function, and dysregulated lipid metabolism, which are associated with hepatic expression and accumulation of ZAAT. We also describe a novel mechanism of ZAAT-mediated mitochondrial dysfunction. We provide evidence that misfolded ZAAT translocates to the mitochondria for degradation. Furthermore, inhibition of ZAAT expression restores the mitochondrial function in ZAAT-expressing hepatocytes. Altogether, our results show that ZAAT aggregation in hepatocytes leads to mitochondrial dysfunction. Our findings suggest a plausible model for AATD liver injury and the possibility of mechanism-based therapeutic interventions for AATD liver disease.