Non-alcoholic fatty liver disease (NAFLD) is closely associated with obesity and insulin resistance. To better understand the pathophysiology of obesity-associated NAFLD, the present study examined the involvement of liver and adipose tissues in metformin actions on reducing hepatic steatosis and inflammation during obesity. C57BL/6J mice were fed a high-fat diet (HFD) for 12 weeks to induce obesity-associated NAFLD and treated with metformin (150 mg/kg/d) orally for the last four weeks of HFD feeding. Compared with HFD-fed control mice, metformin-treated mice showed improvement in both glucose tolerance and insulin sensitivity. Also, metformin treatment caused a significant decrease in liver weight, but not adiposity. As indicated by histological changes, metformin treatment decreased hepatic steatosis, but not the size of adipocytes. In addition, metformin treatment caused an increase in the phosphorylation of liver AMP-activated protein kinase (AMPK), which was accompanied by an increase in the phosphorylation of liver acetyl-CoA carboxylase and decreases in the phosphorylation of liver c-Jun N-terminal kinase 1 (JNK1) and in the mRNA levels of lipogenic enzymes and proinflammatory cytokines. However, metformin treatment did not significantly alter adipose tissue AMPK phosphorylation and inflammatory responses. In cultured hepatocytes, metformin treatment increased AMPK phosphorylation and decreased fat deposition and inflammatory responses. Additionally, in bone marrow-derived macrophages, metformin treatment partially blunted the effects of lipopolysaccharide on inducing the phosphorylation of JNK1 and nuclear factor kappa B (NF-κB) p65 and on increasing the mRNA levels of proinflammatory cytokines. Taken together, these results suggest that metformin protects against obesity-associated NAFLD largely through direct effects on decreasing hepatocyte fat deposition and on inhibiting inflammatory responses in both hepatocytes and macrophages.