Nonalcoholic steatohepatitis (NASH) is a leading cause of liver disease worldwide. However, the molecular basis of how benign steatosis progresses to NASH is incompletely understood, which has limited the identification of therapeutic targets. Here we show that the transcription regulator TAZ (WWTR1) is markedly higher in hepatocytes in human and murine NASH liver than in normal or steatotic liver. Most importantly, silencing of hepatocyte TAZ in murine models of NASH prevented or reversed hepatic inflammation, hepatocyte death, and fibrosis, but not steatosis. Moreover, hepatocyte-targeted expression of TAZ in a model of steatosis promoted NASH features, including fibrosis. In vitro and in vivo mechanistic studies revealed that a key mechanism linking hepatocyte TAZ to NASH fibrosis is TAZ/TEA domain (TEAD)-mediated induction of Indian hedgehog (Ihh), a secretory factor that activates fibrogenic genes in hepatic stellate cells. In summary, TAZ represents a previously unrecognized factor that contributes to the critical process of steatosis-to-NASH progression.