Fatty acid beta-oxidation occurs in both mitochondria and peroxisomes. Mitochondria catalyze the beta-oxidation of the bulk of short-, medium-, and long-chain fatty acids derived from diet, and this pathway constitutes the major process by which fatty acids are oxidized to generate energy. Peroxisomes are involved, preferentially, in the beta-oxidation chain shortening of very long chain fatty acids (VLCFAs) and in the process produce H2O2. Long-chain fatty acids and VLCFAs are also metabolized by the cytochrome P450 CYP4A omega-oxidation system to toxic dicarboxylic acids (DCAs) that serve as substrates for peroxisomal beta-oxidation, and this process also leads to the production of superoxide and H2O2. The genes encoding peroxisomal, microsomal, and certain mitochondrial fatty acid metabolizing enzymes in liver are transcriptionally regulated by peroxisome proliferator-activated receptor alpha (PPAR alpha). Deficiencies of the enzymes of peroxisomal beta-oxidation have been recognized as important causes of disease. Evidence from mice deficient in PPAR alpha (PPAR alpha-/-), deficient in peroxisomal fatty acyl-CoA oxidase (AOX-/-), the first enzyme of the classical beta-oxidation system, and deficient in both PPAR alpha and AOX (PPAR alpha-/-AOX-/-) points to the critical importance of PPAR alpha-inducible peroxisomal and microsomal oxidation systems that metabolize LCFAs and VLCFAs in the pathogenesis of nonalcoholic microvesicular hepatic steatosis and steatohepatitis. These and other mouse models should provide greater understanding of the molecular mechanism responsible for hepatic steatosis and steatohepatitis. Deficiency of AOX disrupts the oxidation of VLCFAs, DCAs, and other substrates leading to extensive microvesicular steatosis and steatohepatitis. Loss of this enzyme also causes sustained hyperactivation of PPAR alpha, leading to transcriptional up-regulation of PPAR alpha-regulated genes, indicating that unmetabolized substrates of AOX function as ligands of PPAR alpha. beta-Oxidation is the major process by which fatty acids are oxidized to generate energy, especially when glucose availability is low during periods of starvation. Mice deficient in PPAR alpha and those nullizygous for both PPAR alpha and AOX show a minimal steatotic phenotype under fed conditions but manifest an exaggerated steatotic response to fasting, indicating that defects in PPAR alpha-inducible fatty acid oxidation determine the severity of fatty liver phenotype to conditions reflecting energy-related stress.