An imbalance between neutrophil elastase (NE) and its inhibitor α1‐antitrypsin (A₁AT) is known to contribute to the development of obesity‐related inflammation. This study aimed to investigate the role of the NE‐A₁AT system in the histological progression of non‐alcoholic fatty liver disease (NAFLD), and to evaluate the ability of it to predict nonalcoholic steatohepatitis (NASH). A total of 252 adults (NAFLD group, n = 202; healthy group, n = 50) were recruited. Clinical biochemical characteristics, NE and A₁AT concentrations were measured in all subjects. Among the NAFLD group, 86 patients had previously undergone liver biopsy and information on histological characteristics was consequently available. The area under the receiver operating characteristic curve (AUC) was used to determine the predictive accuracy of the NE‐A₁AT system for NASH. NAFLD patients had an elevated serum NE concentration and a reduced A₁AT level with consequent NE/A₁AT imbalance. NE increased in the early stage of steatosis, preceding the decline in A₁AT, dating from the onset of NASH (NAS 3–4), and subsequently NE/A₁AT increased in the presence of NASH. Nonetheless, this increase began to resolve as the disease state progressed to advanced fibrosis. A₁AT had a sensitivity (SEN) of 83.8% and a specificity (SP) of 83.3% with the optimal cut‐off of −1459.43, NE/A₁AT had a SEN of 88.8% and a SP of 83.3% with cut‐off of 0.363 to predict NASH. An increased NE: A₁AT ratio is closely associated with liver Inflammation in patients with NASH and could serve as a novel marker to predict NASH in humans.