Nonalcoholic fatty liver disease (NAFLD) is the most common chronic liver disorder that is closely associated with insulin resistance and type 2 diabetes. Previous studies have suggested that hepatocyte nuclear factor 1b (HNF1b) ameliorates insulin resistance. However, the role of HNF1b in the regulation of lipid metabolism and hepatic steatosis remains poorly understood. We found that HNF1b expression was decreased in steatotic livers. We injected mice with lentivirus (LV) expressing HNF1b shRNA to generate mice with hepatic knockdown of HNF1b. We also injected high fat (HF) diet-induced obese and db/db diabetic mice with LV expressing HNF1b to overexpress HNF1b. Knockdown of HNF1b increased hepatic lipid contents and induced insulin resistance in mice and in hepatocytes. Knockdown of HNF1b worsened HF diet-induced increases in hepatic lipid contents, liver injury and insulin resistance in mice and PA-induced lipid accumulation and impaired insulin signaling in hepatocytes. Moreover, overexpression of HNF1b alleviated HF diet-induced increases in hepatic lipid content and insulin resistance in mice. Knockdown of HNF1b increased expression of genes associated with lipogenensis and endoplasmic reticulum (ER) stress. DPP4 and NOX1 expression was increased by knockdown of HNF1b and HNF1b directly bound with the promoters of DPP4 and NOX1. Overexpression of DPP4 or NOX1 was associated with an increase in lipid droplets in hepatocytes and decreased expression of DPP4 or NOX1 suppressed the effects of knockdown of HNF1b knockdown on triglyceride (TG) formation and insulin signaling. Knockdown of HNF1b increased superoxide level and decreased glutathione content, which was inhibited by downregulation of DPP4 and NOX1. N-acetylcysteine (NAC) suppressed HNF1b knockdown-induced ER stress, TG formation and insulin resistance. Palmitic acid (PA) decreased HNF1b expression which was inhibited by NAC. Taken together, these studies demonstrate that HNF1b plays an essential role in controlling hepatic TG homeostasis and insulin sensitivity by regulating DPP4/NOX1mediated generation of superoxide.