The primary aim of this study was to compare the effects of pentoxifylline (PTX) versus placebo on the histological features of nonalcoholic steatohepatitis (NASH). In all, 55 adults with biopsy‐confirmed NASH were randomized to receive PTX at a dose of 400 mg three times a day (n = 26) or placebo (n = 29) over 1 year. The primary efficacy endpoint was defined as improvement in histological features of NASH through reduction in steatosis, lobular inflammation, and/or hepatocellular ballooning as reflected by a decrease of ≥2 points in the nonalcoholic fatty liver disease (NAFLD) activity score (NAS). After 1 year, intention‐to‐treat analysis showed a decrease of ≥2 points in the NAS in 38.5% of patients on PTX versus 13.8% of those on placebo (P = 0.036). Per protocol analysis, a decrease of ≥2 points in the NAS from baseline was observed in 50% of the patients on PTX versus 15.4% of those on placebo (P = 0.01). The mean change in NAS score from baseline was −1.6 in the PTX group, versus −0.1 in the placebo group (P < 0.001). PTX significantly improved steatosis (mean change in score −0.9 versus −0.04 with placebo, P < 0.001) and lobular inflammation (median change −1 versus 0 with placebo, P = 0.02). No significant effects in hepatocellular ballooning were observed. PTX also improved liver fibrosis (mean change in fibrosis score was −0.2 among those on PTX versus +0.4 among those on placebo, P = 0.038). Although not statistically significant (P = 0.17), improvement in fibrosis was observed in a greater proportion (35%) of patients in the PTX group compared to placebo (15%). Adverse effects were similar in both groups. Conclusion: PTX improved histological features of NASH compared to placebo. PTX was well tolerated in patients with NASH (ClinicalTrials.gov number NCT00590161). (HEPATOLOGY 2011)