Nonalcoholic fatty liver disease (NAFLD), the major reason for abnormal liver function in the Western world, is associated with obesity and diabetes and is characterized by insulin resistance (IR). IR is regulated by mediators released from cells of the immune system or adipocytes and proinflammatory cytokines such as tumor necrosis factor-α (TNFα). The importance of TNFα in human and animal fatty liver diseases, both caused by genetic manipulation and overnutrition, has been shown convincingly. Furthermore, neutralization of TNFα activity improves IR and fatty liver disease in animals. Adiponectin is a potent TNFα-neutralizing and anti-inflammatory adipokine and in vitro and experimental animal studies have proven the importance of this mediator in counteracting inflammation and IR. Anti-inflammatory effects of adiponectin are exerted both by suppressing TNFα synthesis and by induction of anti-inflammatory cytokines such as interleukin-10 or interleukin-1–receptor antagonist. Therefore, the balance between various mediators, either derived from the immune system or adipose tissue, appears to play an important role in hepatic and systemic insulin action and in the development of fatty liver disease.