At the beginning, the hepatocytes present small fat vacuoles (liposomes) around the nucleus (microvesicular fatty change). In this stage, liver cells are filled with multiple fat droplets that do not displace the centrally located nucleus. In the late stages, the size of the vacuoles increases, pushing the nucleus to the periphery of the cell, giving characteristic signet ring appearance (macrovesicular fatty change). These vesicles are well-delineated and optically "empty" because fats dissolve during tissue processing. Large vacuoles may coalesce and produce fatty cysts, which are irreversible lesions. Macrovesicular steatosis is the most common form and is typically associated with alcohol, diabetes, obesity, and corticosteroids. Acute fatty liver of pregnancy and Reyes syndrome are examples of severe liver disease caused by microvesicular fatty change. The diagnosis of steatosis is made when fat in the liver exceeds 5–10% by weight. Defects in fatty acid metabolism are responsible for pathogenesis of FLD, which may be due to imbalance in energy consumption and  its combustion,  resulting in lipid storage, or can be a consequence of peripheral resistance to insulin, whereby the transport of fatty acids from adipose tissue to the liver is increased. Impairment or inhibition of receptor molecules (PPAR-α, PPAR-γ and SREBP1) that control the enzymes responsible for the oxidation and synthesis of fatty acids appears to contribute to fat accumulation. In addition, alcohol use disorder is known to damage mitochondria and other cellular structures, further impairing cellular energy mechanism. On the other hand, non-alcoholic FLD may begin as excess of unmetabolised energy in liver cells.
The serum alanine transaminase (ALT) level usually is greater than the aspartate transaminase (AST) level in the nonalcoholic variant and the opposite in alcoholic FLD (AST:ALT more than 2:1). Simple blood test may help to determine the magnitude of the disease by assessing the degree of liver fibrosis. For example, AST-to-platelets ratio index (APRI score) and several other score, calculated from the results of blood test, can detect the degree of liver fibrosis and predict the future formation of liver cancer.Imaging studies are often obtained during the evaluation process. Ultrasonography reveals a "bright" liver with increased echogenicity. Medical imaging can aid in diagnosis of fatty liver; fatty livers have lower density than spleens on computed tomography (CT), and fat appears bright in T1-weighted magnetic resonance images (MRIs). Magnetic resonance elastography, a variant of magnetic resonance imaging, is investigated as a non-invasive method to diagnose fibrosis progression. Histological diagnosis by liver biopsy is the most accurate measure of fibrosis and liver fat progression as of 2018. Conventional imaging methods, such as ultrasound, CT and MRI, are not specific enough to detect fatty liver disease unless fat occupies at least 30% of the liver volume. Treatment
Decreasing caloric intake by at least 30% or by approximately 750–1,000 kcal/day results in improvement in hepatic steatosis. For people with NAFLD or NASH, weight loss via a combination of diet and exercise was shown to improve or resolve the disease.