Ethanol-induced fatty liver is a worldwide health problem without effective therapeutic methods. The underlying mechanisms are extremely complex and not fully understood. The hepatosteatosis caused by ethanol can be attributed to many factors, including the changes of the redox condition, transportation impairment of the synthesized lipid, inhibition of fatty acid oxidation, and the enhancement of the lipogenesis. Recent studies focus on the reduced oxidation of fatty acid and the enhancement of the do novo lipogenesis, and several factors are sequentially revealed. Two important nuclear transcription factors, peroxisome proliferators-activated receptor α (PPARα) and sterol regulatory element binding protein-1 (SREBP-1), and the lipid metabolism-associated enzymes regulated by the two molecules, are shown to be involved in ethanol-induced steatosis. The AMP-dependent protein kinase, adiponectin, and tumor necrosis factor α (TNF-α) may mediate the modulation of ethanol on PPARα and SREBP-1. In addition, a number of studies demonstrate that plasminogen activator inhibitor-1 (PAI-1) is also involved in ethanol- induced fatty liver, and its effects may be associated with the TNF-α production. Furthermore, the role of CYP2E1 has also been investigated. Some studies showed that CYP2E1 played a critical role in the development of alcoholic fatty liver, which was denied by other reports. As such, the exact role of CYP2E1 needs to be further studied.