Hepatosteatosis, the ectopic accumulation of lipid in the liver, is one of the earliest clinical signs of alcoholic liver disease (ALD). Alcohol-dependent deregulation of liver ceramide levels as well as inhibition of AMPK and PPARα activity are thought to contribute to hepatosteatosis development. Adiponectin can regulate lipid handling in the liver, and has been shown to reduce ceramide levels and activate AMPK and PPARα. However, the mechanisms by which adiponectin prevents alcoholic hepatosteatosis remain incompletely characterized. To address this question, we assessed ALD progression in wild-type (WT) and adiponectin knockout (KO) mice fed an ethanol containing liquid diet or isocaloric control diet. Adiponectin KO mice relative to WT had increased alcohol-induced hepatosteatosis and hepatomegaly, similar modest increases in serum ALT and reduced liver TNFα. Restoring circulating adiponectin levels using recombinant adiponectin ameliorated alcohol-induced hepatosteatosis and hepatomegaly in adiponectin KO mice. Alcohol-fed WT and adiponectin KO animals had equivalent reductions in AMPK protein and PPARα DNA binding activity compared to control-fed animals. No difference in P-AMPK/AMPK ratio was detected, suggesting alcohol-dependent deregulation of AMPK and PPARα in the absence of adiponectin are not primary causes of the observed increase in hepatosteatosis in these animals. By contrast, alcohol treatment increased liver ceramide levels in adiponectin KO but not WT mice. Importantly, pharmacological inhibition of de novo ceramide synthesis in adiponectin KO mice abrogated alcohol-mediated increases in liver ceramides, steatosis and hepatomegaly. This data suggests adiponectin reduces alcohol-induced steatosis and hepatomegaly through regulation of liver ceramides but does not prevent alcohol-induced liver damage.