Fatty liver is associated with endoplasmic reticulum stress and activation of the hepatic Unfolded Protein Response (UPR). Reduced hepatic expression of the UPR regulator X-box binding protein 1 spliced (XBP1s) is associated with human NASH, and feeding mice a high fat diet with fructose/sucrose causes progressive, fibrosing steatohepatitis. This study examines the role of XBP1 in non-alcoholic fatty liver injury and fatty acid-induced cell injury. Hepatocyte-specific Xbp1-deficient (Xbp1^-/-) mice were fed a high fat/sugar (HFS) diet for up to 16 weeks. HFS-fed Xbp1^-/- mice exhibited higher serum alanine aminotransferase levels compared to Xbp1^fl/fl controls. RNA-Sequencing and Gene Ontogeny pathway analysis of hepatic mRNA revealed that apoptotic process, inflammatory response and extracellular matrix structural constituent pathways had enhanced activation in HFS-fed Xbp1^-/- mice. Liver histology demonstrated enhanced injury and fibrosis but less steatosis in the HFS-fed Xbp1^-/- mice. Hepatic Col1a1 and Tgfβ1 gene expression, as well as Chop and phosphorylated JNK (p-JNK), were increased in Xbp1^-/- compared to Xbp1^fl/fl mice after HFS feeding. In vitro, stable XBP1-knockdown Huh7 cells (Huh7-KD) and scramble control cells (Huh7-SCR) were generated and treated with palmitic acid (PA) for 24 hrs. PA-treated Huh7-KD cells had increased cytotoxicity measured by LDH release, apoptotic nuclei and caspase3/7 activity assays compared to Huh7-SCR cells. CHOP and p-JNK expression was also increased in Huh7-KD cells following PA treatment. In conclusion, loss of XBP1 enhances injury in both in vivo and in vitro models of fatty liver injury. We speculate that hepatic XBP1 plays an important protective role in pathogenesis of NASH.