Excessive lipid accumulation and chemical abuse can induce fatty liver diseases in fish, but the underlying mechanism and therapies are unknown. The present study aims to evaluate the effects of Xiaochaihu Decoction (XCHD) on the growth performance, lipid metabolism and antioxidant function of hybrid grouper in vitro and in vivo, and provide evidence as to whether it can be potentially used as a medicine for liver diseases in aquaculture. In vitro, steatosis model of hybrid grouper primary hepatocytes were incubated for 48 h in control or lipid emulsion (LE)-containing medium with or without 24 h post-treatment with XCHD. XCHD treatment reversed the LE-induced intracellular lipid accumulation, cell viability and hepatocytes morphological structure. In vivo, a total of 300 hybrid grouper with an average initial weight of 25.43 ± 0.18 g were fed diets containing five graded levels of XCHD at 150–1200 mg/kg diet for 8 weeks. After that, a challenge trial was conducted by injection of D-GalN/LPS to induce liver injury. As a result, dietary supplementation with 150–300 mg/kg XCHD diets can significant improve growth performance and feed utilization (P < 0.05). Dietary XCHD down-regulated the expression of lipogenic-related genes (G6PD, DGAT2 and ME1) and up-regulated lipolysis-related genes (ATGL, PPARα and LPL) expression in the liver of hybrid grouper. Livers challenged with D-GalN/LPS exhibited extensive areas of vacuolization with the disappearance of nuclei and the loss of hepatic architecture. These pathological alterations were ameliorated by XCHD treatment. XCHD significantly down-regulated the D-GalN/LPS induced apoptosis-related genes caspase-3, caspase-9 and p53 mRNA expression and up-regulated the antioxidant-related genes CAT and MnSOD mRNA expression in dose dependent manner, respectively. XCHD potently reduced hepatic lipid accumulation and enhanced antioxidant capability in hybrid grouper and may be a potential fish-feed additive to prevent fatty liver diseases onset and progression.