Adiponectin has antilipogenic and anti-inflammatory effects, while tumor necrosis factor alpha (TNF-alpha) reduces insulin sensitivity and has proinflammatory effects. We examined (1) the extent to which hypoadiponectinemia and TNF-alpha activation are features of nonalcoholic steatohepatitis (NASH) and (2) whether serum levels of these markers correlate with the severity of histological changes in 109 subjects with nonalcoholic fatty liver disease (NAFLD), including 80 with NASH and 29 with simple steatosis. By multivariate analysis, subjects with NASH had reduced adiponectin level and increased TNF-alpha and soluble TNF receptor 2 (sTNFR2)-but not leptin levels, compared with controls matched by age, sex, and body mass index; these differences were independent of the increased insulin resistance (by homeostasis model [HOMA-IR]) in NASH. When compared with simple steatosis, NASH was associated with lower adiponectin levels and higher HOMA-IR, but there were no significant differences in the levels of TNF-alpha and sTNFR2. The majority of subjects with steatohepatitis (77%) had adiponectin levels less than 10 microg/mL and HOMA-IR greater than 3 units, but only 33% of those with pure steatosis had these findings. HOMA-IR and low serum adiponectin were also independently associated with increased grades of hepatic necroinflammation. In conclusion, hypoadiponectinemia is a feature of NASH independent of insulin resistance. Reduced adiponectin level is associated with more extensive necroinflammation and may contribute to the development of necroinflammatory forms of NAFLD.