Liver disease in the alcoholic is due not only to malnutrition but also to ethanol's hepatotoxicity linked to its metabolism by means of the alcohol dehydrogenase and cytochrome P450 2E1 (CYP2E1) pathways and the resulting production of toxic acetaldehyde. In addition, alcohol dehydrogenase-mediated ethanol metabolism generates the reduced form of nicotinamide adenine dinucleotide (NADH), which promotes steatosis by stimulating the synthesis of fatty acids and opposing their oxidation. Steatosis is also promoted by excess dietary lipids and can be attenuated by their replacement with medium-chain triglycerides. Through reduction of pyruvate, elevated NADH also increases lactate, which stimulates collagen synthesis in myofibroblasts. Furthermore, CYP2E1 activity is inducible by its substrates, not only ethanol but also fatty acids. Their excess and metabolism by means of this pathway generate release of free radicals, which cause oxidative stress, with peroxidation of lipids and membrane damage, including altered enzyme activities. Products of lipid peroxidation such as 4-hydroxynonenal stimulate collagen generation and fibrosis, which are further increased through diminished feedback inhibition of collagen synthesis because acetaldehyde forms adducts with the carboxyl-terminal propeptide of procollagen in hepatic stellate cells. Acetaldehyde is also toxic to the mitochondria, and it aggravates their oxidative stress by binding to reduced glutathione and promoting its leakage. Oxidative stress and associated cellular injury promote inflammation, which is aggravated by increased production of the proinflammatory cytokine tumor necrosis factor-alpha in the Kupffer cells. These are activated by induction of their CYP2E1 as well as by endotoxin. The endotoxin-stimulated tumor necrosis factor-alpha release is decreased by dilinoleoylphosphatidylcholine, the active phosphatidylcholine (PC) species of polyenylphosphatidylcholine (PPC). Moreover, defense mechanisms provided by peroxisome proliferator-activated receptor alpha and omega fatty acid oxidation are readily overwhelmed, particularly in female rats and also in women who have low hepatic induction of fatty acid-binding protein (L-FABPc). Accordingly, the intracellular concentration of free fatty acids may become high enough to injure membranes, thereby contributing to necrosis, inflammation, and progression to fibrosis and cirrhosis. Eventually, hepatic S-adenosylmethionine and PCs become depleted in the alcoholic, with impairment of their multiple cellular functions, which can be restored by PC replenishment. Thus, prevention and therapy opposing the development of steatosis and its progression to more severe injury can be achieved by a multifactorial approach: control of alcohol consumption, avoidance of obesity and of excess dietary long-chain fatty acids, or their replacement with medium-chain fatty acids, and replenishment of S-adenosylmethionine and PCs by using PPC. Progress in the understanding of the pathogenesis of alcoholic fatty liver and its progression to inflammation and fibrosis has resulted in prospects for their better prevention and treatment.