The unfolded protein response (UPR) is a protective cellular response activated under conditions of endoplasmic reticulum (ER) stress. The hepatic UPR is activated in several forms of liver disease including nonalcoholic fatty liver disease (NAFLD). Recent data defining the role of the UPR in hepatic lipid metabolism have identified molecular mechanisms that may underlie the association between UPR activation and NAFLD. It has become increasingly evident that the IRE1α/Xbp1 pathway of the UPR is critical for hepatic lipid homeostasis, and dysregulation of this evolutionarily conserved pathway is associated with human nonalcoholic steatohepatitis (NASH). Although increasing evidence has delineated the importance of UPR pathway signaling in fatty liver disorders, the regulation of the hepatic UPR in normal physiology and fatty liver disorders remains incompletely understood. Understanding the role of the UPR in hepatic lipid metabolism may lead to the identification of novel therapeutic targets for the treatment of NAFLD.