Non-alcoholic fatty liver disease (NAFLD) is manifested by hepatic steatosis, insulin resistance, hepatocyte death, and systemic inflammation. Obesity induces steatosis and chronic inflammation in the liver. However, the precise mechanism underlying hepatic steatosis in the setting of obesity remains unclear. Here, we report studies that address this question. After 14 weeks on a high-fat diet (HFD) with high sucrose, C57BL/6 mice revealed a phenotype of liver steatosis. Transcriptional profiling analysis of the liver tissues was performed using RNA sequencing (RNA-seq). Our RNA-seq data revealed 692 differentially expressed genes involved in processes of lipid metabolism, oxidative stress, immune responses, and cell proliferation. Notably, the gene encoding neutral sphingomyelinase, SMPD3, was predominantly upregulated in the liver tissues of the mice displaying a phenotype of steatosis. Moreover, nSMase2 activity was elevated in these tissues of the liver. Pharmacological and genetic inhibition of nSMase2 prevented intracellular lipid accumulation and TNFα-induced inflammation in in-vitro HepG2-steatosis cellular model. Furthermore, nSMase2 inhibition ameliorates oxidative damage by rescuing PPARα and preventing cell death associated with high glucose/oleic acid-induced fat accumulation in HepG2 cells. Collectively, our findings highlight the prominent role of nSMase2 in hepatic steatosis, which could serve as a potential therapeutic target for NAFLD and other hepatic steatosis-linked disorders.