Transforming growth factor beta (TGF‐β) signaling activates Smad‐ and TGF‐β‐activated kinase 1 (TAK1)‐dependent signaling to regulate cell survival, proliferation, fibrosis, and tumorigenesis. The effects of TGF‐β signaling on metabolic syndrome, including nonalcoholic fatty liver disease, remain elusive. Wild‐type (WT) and hepatocyte‐specific TGF‐β receptor type II‐deficient (Tgfbr2ΔHEP) mice were fed a choline‐deficient amino acid (CDAA)‐defined diet for 22 weeks to induce NASH. WT mice fed a CDAA diet displayed increased activation of Smad2/3 and had marked lipid accumulation, inflammatory cell infiltration, hepatocyte death, and fibrosis; in comparison, Tgfbr2ΔHEP mice fed a CDAA diet had suppressed liver steatosis, inflammation, and fibrosis. Both palmitate‐induced steatotic hepatocytes and hepatocytes isolated from WT mice fed a CDAA diet had increased susceptibility to TGF‐β‐mediated death. TGF‐β‐mediated death in steatotic hepatocytes was inhibited by silencing Smad2 or blocking reactive oxygen species (ROS) production and was enhanced by inhibiting TAK1 or nuclear factor kappa B. Increased hepatic steatosis in WT mice fed a CDAA diet was associated with the increased expression of lipogenesis genes (Dgat1 and Srebp1c), whereas the decreased steatosis in Tgfbr2ΔHEP mice was accompanied by the increased expression of genes involved in β‐oxidation (Cpt1 and Acox1). In combination with palmitate treatment, TGF‐β signaling promoted lipid accumulation with induction of lipogenesis‐related genes and suppression of β‐oxidation‐related genes in hepatocytes. Silencing Smad2 decreased TGF‐β‐mediated lipid accumulation and corrected altered gene expression related to lipid metabolism in hepatocytes. Finally, we confirmed that livers from patients with nonalcoholic steatohepatitis (NASH) displayed phosphorylation and nuclear translocation of Smad2/3. Conclusions: TGF‐β signaling in hepatocytes contributes to hepatocyte death and lipid accumulation through Smad signaling and ROS production that promote the development of NASH. (Hepatology 2014;59:483–495)