Dietary n-3 polyunsaturated fatty acids (n-3 PUFAs) have well-documented protective effects against obesity-induced insulin resistance and hepatic steatosis. Here, we investigated the effects of endogenous n-3 PUFAs on diet-induced fatty liver disease using fat-1 transgenic mice (fat-1) capable of converting n-6 to n-3 PUFAs. Wild-type (WT) and fat-1 mice were maintained on a high-fat diet (HFD) for 5months. HFD-induced weight gain and fatty liver were more prominent in WT mice than fat-1 mice. Histological analysis indicated that WT mice fed the HFD developed moderate-to-severe macrovesicular steatosis, whereas fat-1 mice developed very mild steatosis. In addition, HFD-induced hepatocyte ballooning and fibrosis were ameliorated in fat-1 mice. Serum alanine transaminase (ALT) and aspartate transaminase (AST) levels were within the respective normal ranges in HFD-fed fat-1 mice, whereas both were significantly elevated in HFD-fed WT mice. The fat-1 mice showed significantly decreased serum lipid levels, including triglycerides, total cholesterol (TC), HDL-C, and LDL-C, compared to WT mice regardless of diet. Specifically, the increases in very low-density lipoprotein cholesterol (VLDL-C) and chylomicrons detected in HFD-fed WT mice were completely blunted in HFD-fed fat-1 mice. Gene expression analysis showed that hepatic Cyp7a1 mRNA and protein expression levels were markedly increased in HFD-fed fat-1 mice. In addition, genes involved in cholesterol uptake (Ldlr) and bile acid excretion (Abcg5 and Abcg8) were increased in the livers of fat-1 mice. These data suggest that n-3 PUFAs ameliorate diet-induced hyperlipidemia and fatty liver through induction of CYP7A1 expression and activation of cholesterol catabolism to bile acid.