Alcoholic liver disease is a major cause of illness and death in the United States. In the initial stages of the disease, fat accumulation in hepatocytes leads to the development of fatty liver (steatosis), which is a reversible condition. If alcohol consumption is continued, steatosis may progress to hepatitis and fibrosis, which may lead to liver cirrhosis. Alcoholic fatty liver has long been considered benign; however, increasing evidence supports the idea that it is a pathologic condition. Blunting of the accumulation of fat within the liver during alcohol consumption may block or delay the progression of fatty liver to hepatitis and fibrosis. To achieve this goal, it is important to understand the underlying biochemical and molecular mechanisms by which chronic alcohol consumption leads to fat accumulation in the liver and fatty liver progresses to hepatitis and fibrosis. In addition to alcohol consumption, dietary fatty acids and obesity have been shown to affect the degree of fat accumulation within the liver. Again, it is important to know how these factors modulate the progression of alcoholic liver disease. The National Institute on Alcohol Abuse and Alcoholism and the Office of Dietary Supplements, National Institutes of Health, sponsored a symposium on "Role of Fatty Liver, Dietary Fatty Acid Supplements, and Obesity in the Progression of Alcoholic Liver Disease" in Bethesda, Maryland, USA, October 2003. The following is a summary of the symposium. Alcoholic fatty liver is a pathologic condition that may predispose the liver to further injury (hepatitis and fibrosis) by cytochrome P450 2E1 induction, free radical generation, lipid peroxidation, nuclear factor-kappa B activation, and increased transcription of proinflammatory mediators, including tumor necrosis factor-alpha. Increased acetaldehyde production and lipopolysaccharide-induced Kupffer cell activation may further exacerbate liver injury. Acetaldehyde may promote hepatic fat accumulation by impairing the ability of peroxisome proliferator-activated receptor alpha to bind DNA, and by increasing the synthesis of sterol regulatory binding protein-1. Unsaturated fatty acids (corn oil, fish oil) exacerbate alcoholic liver injury by accentuating oxidative stress, whereas saturated fatty acids are protective. Polyenylphosphatidylcholine may prevent liver injury by down-regulating cytochrome P450 2E1 activity, attenuating oxidative stress, reducing the number of activated hepatic stellate cells, and up-regulating collagenase activity. Nonalcoholic steatohepatitis may develop through several mechanisms, such as oxidative stress, mitochondrial dysfunction and associated impaired fat metabolism, dysregulated cytokine metabolism, insulin resistance, and altered methionine/S-adenosylmethionine/homocysteine metabolism. Obesity (adipose tissue) may contribute to the development of alcoholic liver disease by generating free radicals, increasing tumor necrosis factor-alpha production, inducing insulin resistance, and producing fibrogenic agents, such as angiotensin II, norepinephrine, neuropeptide Y, and leptin. Finally, alcoholic fatty liver transplant failure may be linked to oxidative stress. In vitro treatment of fatty livers with interleukin-6 may render allografts safer for clinical transplantation.