The prevalence of drug-induced liver injury (DILI) and viral liver infections presents significant challenges in modern healthcare and contributes to considerable morbidity and mortality worldwide. Concurrently, metabolic dysfunction-associated fatty liver disease (MAFLD) has emerged as a major public health concern, reflecting the increasing rates of obesity and leading to more severe complications such as fibrosis and hepatocellular carcinoma. X-box binding protein 1 (XBP1) is a distinct transcription factor with a basic-region leucine zipper structure, whose activity is regulated by alternative splicing in response to disruptions in endoplasmic reticulum (ER) homeostasis and the unfolded protein response (UPR) activation. XBP1 interacts with a key signaling component of the highly conserved UPR and is critical in determining cell fate when responding to ER stress in liver diseases. This review aims to elucidate the emerging roles and molecular mechanisms of XBP1 in liver pathogenesis, focusing on its involvement in DILI, viral liver infections, MAFLD, fibrosis/cirrhosis, and liver cancer. Understanding the multifaceted functions of XBP1 in these liver diseases offers insights into potential therapeutic strategies to restore ER homeostasis and mitigate liver damage.