The pathogenesis of nonalcoholic steatohepatitis is primarily an immune-driven disease and a known factor associated with treatment failure of chronic hepatitis C with interferon (IFN) and ribavirin. We studied the hepatocyte response in a model of steatosis at the transcriptome level and the antiviral action of IFN against hepatitis C virus (HCV) in this setting. In this study, we have shown that lipid loading (oleic acid and palmitic acid, OA:PA) of Huh-7 cells leads to increased expression of classical interferon-stimulated genes (ISGs) and NF-κβ-dependent pro-inflammatory genes. A selective blocker of Toll-like receptor (TLR)2 signaling suppressed NF-κβ promoter activity by OA:PA, suggesting that free fatty acids (FFAs) act as a TLR2 pathogen-associated molecular pattern. Furthermore, in the presence of OA:PA, IFN stimulation and HCV infection (Jc1) increased ISG expression. Somewhat counterintuitive to the increase in ISGs, the anti-HCV activity of IFN was attenuated in the presence of OA:PA. Interestingly, the combination of OA:PA, HCV, and IFN-α stimulation resulted in a significant increase in CXCL8 protein production, a cytokine known to have anti-IFN modulating activity. Thus, in an in vitro model of steatosis, the FFAs OA and PA drive an NF-κβ-dependent inflammatory and ISG gene expression profile via TLR2 activation. Furthermore, FFA synergistically increases IFN-driven gene expression that may account for HCV treatment failure in vivo.