Development of obesity-associated insulin resistance and diabetes mellitus type 2 has been linked to activation of proinflammatory pathways in the liver, leading to impaired insulin signal transduction. To further define the role of hepatic NF-κB activation in this process, we have analyzed glucose metabolism in mice with liver-specific inactivation of the NF-κB essential modulator gene (NEMO^L-KO mice) exposed to a high-fat diet (HFD). These animals are protected from the development of obesity-associated insulin resistance, highlighting the importance of hepatic NF-κB activation in this context. However, hepatic NEMO deficiency synergizes with HFD in the development of liver steatosis as a consequence of decreased peroxisome proliferator-activated receptor (PPAR-α) and increased PPAR-γ expression. Steatosis interacts with increased inflammation, causing elevated apoptosis in the livers of these mice under HFD. These changes result in liver tumorigenesis of NEMO^L-KO mice under normal diet, a process that is largely aggravated when these mice are exposed to HFD. These data directly demonstrate the interaction of hepatic inflammation, dietary composition, and metabolism in the development of liver tumorigenesis.