The clinical implications of non-alcoholic fatty liver diseases (NAFLD) derive from their potential to progress to fibrosis and cirrhosis. Inappropriate dietary fat intake, excessive intake of soft drinks, insulin resistance and increased oxidative stress results in increased free fatty acid delivery to the liver and increased hepatic triglyceride (TG) accumulation. An olive oil-rich diet decreases accumulation of TGs in the liver, improves postprandial TGs, glucose and glucagon-like peptide-1 responses in insulin-resistant subjects, and upregulates glucose transporter-2 expression in the liver. The principal mechanisms include: decreased nuclear factor-kappaB activation, decreased low-density lipoprotein oxidation, and improved insulin resistance by reduced production of inflammatory cytokines (tumor necrosis factor, interleukin-6) and improvement of jun N-terminal kinase-mediated phosphorylation of insulin receptor substrate-1. The beneficial effect of the Mediterranean diet is derived from monounsaturated fatty acids, mainly from olive oil. In this review, we describe the dietary sources of the monounsaturated fatty acids, the composition of olive oil, dietary fats and their relationship to insulin resistance and postprandial lipid and glucose responses in non-alcoholic steatohepatitis, clinical and experimental studies that assess the relationship between olive oil and NAFLD, and the mechanism by which olive oil ameliorates fatty liver, and we discuss future perspectives.