Levels of augmenter of liver regeneration (ALR), a multifunctional protein, are reduced in steatohepatitis. ALR depletion from ALRflox/flox/Alb‐Cre [ALR‐L‐knockout (KO)] mouse causes robust steatosis and apoptosis of hepatocytes, and pericellular fibrosis between 1 and 2 wk postbirth. Steatosis regresses by 4 wk upon reappearance of ALR‐expressing hepatocytes. We investigated mechanisms of ALR depletion‐induced steatosis. ALR‐L‐KO mice (1‐, 2‐, and 4 wk old) and Adeno‐Cre‐transfected ALRflox/flox hepatocytes were used for in vivo and in vitro studies. ALR depletion from hepatocytes in vivo downregulated peroxisome proliferator‐activated receptor (PPAR)‐α, carnitine palmitoyl transferase I (CPTl)a, peroxisomal membrane protein 70 (PMP70) (modest down‐regulation), and acyl‐CoA oxidase 1 (ACOX1). The markedly up‐regulated (20X) novel microRNA‐540 (miR‐540) was identified to target PPARα, PMP70, ACOX1, and CPT1a. ALR depletion from primary hepatocytes increased oxidative stress, miR‐540 expression, and steatosis and down‐regulated PPARα, ACOX1, PMP70, and CPT1a expression. Anti‐miR‐540 mitigated ALR depletion‐induced steatosis and prevented loss of PPARα, ACOX1, PMP70, and CPT1a expression. Antioxidant N‐acetylcysteine and recombinant ALR (rALR) both inhibited ALR depletion‐induced miR‐540 expression and lipid accumulation in hepatocytes. Finally, treatment of ALR‐L‐KO mice with rALR between 1 and 2 wk prevented miR‐540 expression, and arrested steatosis and fibrosis. We conclude that ALR deficiency‐mediated oxidative stress induces generation of miR‐540, which promotes steatosis by dysregulating peroxisomal and mitochondrial lipid homeostasis.—Kumar, S., Rani, R., Karns, R., Gandhi, C. R. Augmenter of liver regeneration protein deficiency promotes hepatic steatosis by inducing oxidative stress and microRNA‐540 expression. FASEB J. 33, 3825–3840 (2019). http://www.fasebj.org