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To review recent advances in the understanding of the mechanism of action of thiazolidinediones (TZDs) in humans.The liver is characterized by excess fat accumulation due to nonalcoholic causes (non-alcoholic fatty liver disease) in most patients with the metabolic syndrome and type 2 diabetes. Simple steatosis can progress to nonalcoholic steatohepatitis (NASH) and cirrhosis. Both of the commercially available antihyperglycemic TZD agonists, pioglitazone and rosiglitazone, are markedly effective in reducing liver fat content by 30–50% and sensitizing the liver to insulin. This reduces the amount of endogenous and exogenous insulin needed to inhibit hepatic glucose production. Decreases in liver fat are closely correlated with increases in serum adiponectin, which is an insulin-sensitizing adipokine produced exclusively by adipose tissue. Both TZDs are equally effective in reducing liver fat. Regarding lipid metabolism, enhanced hepatic insulin sensitivity would be predicted to lower VLDL and serum triglycerides and increase HDL-cholesterol. Pioglitazone and rosiglitazone have different effects on serum lipids, which cannot be attributed to simple insulin sensitization. Very recently, TZDs have been shown to reduce not only steatosis but possibly also hepatocellular damage in NASH.Given the uncertainties in benefits of TZDs in reducing cardiovascular disease in type 2 diabetes, as well as other sideeffects (heart failure, fractures), TZDs may in the future be increasingly used in patients with nonalcoholic steatohepatitis.