Fatty acid β-oxidation occurs in both mitochondria and peroxisomes. Mitochondria catalyze the β-oxidation of the bulk of short-, medium-, and long-chain fatty acids derived from diet, and this pathway constitutes the major process by which fatty acids are oxidized to generate energy. Peroxisomes are involved, preferentially, in the β-oxidation chain shortening of very long chain fatty acids (VLCFAs) and in the process produce H2O2. Long-chain fatty acids and VLCFAs are also metabolized by the cytochrome P450 CYP4A ω-oxidation system to toxic dicarboxylic acids (DCAs) that serve as substrates for peroxisomal β-oxidation, and this process also leads to the production of superoxide and H2O2. The genes encoding peroxisomal, microsomal, and certain mitochondrial fatty acid metabolizing enzymes in liver are transcriptionally regulated by peroxisome proliferator-activated receptor α (PPARα). Deficiencies of the enzymes of peroxisomal β-oxidation have been recognized as important causes of disease. Evidence from mice deficient in PPARα (PPARα-/-), deficient in peroxisomal fatty acyl-CoA oxidase (AOX-/-), the first enzyme of the classical β-oxidation system, and deficient in both PPARα and AOX (PPARα-/-AOX-/-) points to the critical importance of PPARα-inducible peroxisomal and microsomal oxidation systems that metabolize LCFAs and VLCFAs in the pathogenesis of nonalcoholic microvesicular hepatic steatosis and steatohepatitis. These and other mouse models should provide greater understanding of the molecular mechanism responsible for hepatic steatosis and steatohepatitis. Deficiency of AOX disrupts the oxidation of VLCFAs, DCAs, and other substrates leading to extensive microvesicular steatosis and steatohepatitis. Loss of this enzyme also causes sustained hyperactivation of PPARα, leading to transcriptional up-regulation of PPARα-regulated genes, indicating that unmetabolized substrates of AOX function as ligands of PPARα. β-Oxidation is the major process by which fatty acids are oxidized to generate energy, especially when glucose availability is low during periods of starvation. Mice deficient in PPARα and those nullizygous for both PPARα and AOX show a minimal steatotic phenotype under fed conditions but manifest an exaggerated steatotic response to fasting, indicating that defects in PPARα-inducible fatty acid oxidation determine the severity of fatty liver phenotype to conditions reflecting energy-related stress.