Nonalcoholic fatty liver disease is a major risk factor for hepatocellular carcinoma (HCC). Astrocyte elevated gene-1/Metadherin (AEG-1/MTDH) augments lipid accumulation (steatosis), inflammation, and tumorigenesis, thereby promoting the whole spectrum of this disease process. Targeting AEG-1 is a potential interventional strategy for nonalcoholic steatohepatitis (NASH) and HCC. Thus, proper understanding of the regulation of this molecule is essential. We found that AEG-1 is palmitoylated at residue cysteine 75 (Cys75). Mutation of Cys75 to serine (Ser) completely abolished AEG-1 palmitoylation. We identified ZDHHC6 as a palmitoyltransferase catalyzing the process in HEK293T cells. To obtain insight into how palmitoylation regulates AEG-1 function, we generated knock-in mice by CRISPR/Cas9 in which Cys75 of AEG-1 was mutated to Ser (AEG-1-C75S). No developmental or anatomical abnormality was observed between AEG-1-wild type (AEG-1-WT) and AEG-1-C75S littermates. However, global gene expression analysis by RNA-sequencing unraveled that signaling pathways and upstream regulators, which contribute to cell proliferation, motility, inflammation, angiogenesis, and lipid accumulation, were activated in AEG-1-C75S hepatocytes compared to AEG-1-WT. These findings suggest that AEG-1-C75S functions as dominant positive and that palmitoylation restricts oncogenic and NASH-promoting functions of AEG-1. We thus identify a previously unknown regulatory mechanism of AEG-1, which might help design new therapeutic strategies for NASH and HCC.