NAFLD prevalence has increased rapidly and become a major global health problem. Tumor necrosis factor α-induced protein 8-like 2 (TIPE2) plays a protective role in a cluster of liver diseases, such as autoimmune hepatitis, hepatitis B, and hepatocellular carcinoma. However, the function of TIPE2 in NAFLD remains unknown. Here, we investigated the role of TIPE2 in the development of NAFLD. Our study found that in vitro overexpression or knockout of TIPE2 significantly ameliorated or aggravated lipid accumulation and inflammation in hepatocytes exposed to metabolic stimulation, respectively. Consistently, in vivo hepatic steatosis, insulin resistance, inflammation, and fibrosis were alleviated in hepatic Tipe2-transgenic mice but exaggerated in hepatic Tipe2-knockout mice treated by metabolic challenges. RNA sequencing revealed that TIPE2 was significantly associated with the mitogen-activated protein kinase pathway. Mechanistic experiments demonstrated that TIPE2 bound with transforming growth factor beta-activated kinase 1 (TAK1), prevented tumor necrosis factor receptor-associated factor 6-mediated TAK1 ubiquitination and subsequently inhibited the TAK1 phosphorylation and activation of TAK1-c-Jun N-terminal kinase (JNK)/p38 signaling. Further investigation showed that blocking the activity of TAK1 reversed the worsening of hepatic metabolic disorders and inflammation in hepatic-specific Tipe2-knockout hepatocytes and mice treated with metabolic stimulation. TIPE2 suppresses NAFLD advancement by blocking TAK1-JNK/p38 pathway and is a promising target molecule for NAFLD therapy.