Nonalcoholic fatty liver disease (NAFLD) is characterized by abnormal accumulation of triglycerides (TG) in the liver and other metabolic syndrome symptoms, but its molecular genetic causes are not completely understood. Here, we show that mice deficient for ubiquitin ligase (E3) Smad ubiquitin regulatory factor 1 (Smurf1) spontaneously develop hepatic steatosis as they age and exhibit the exacerbated phenotype under a high-fat diet (HFD). Our data indicate that loss of Smurf1 up-regulates the expression of peroxisome proliferator-activated receptor γ (PPARγ) and its target genes involved in lipid synthesis and fatty acid uptake. We further show that PPARγ is a direct substrate of Smurf1-mediated non-proteolytic lysine 63 (K63)-linked ubiquitin modification that suppresses its transcriptional activity, and treatment of Smurf1-deficient mice with a PPARγ antagonist, GW9662, completely reversed the lipid accumulation in the liver. Finally, we demonstrate an inverse correlation of low SMURF1 expression to high body mass index (BMI) values in human patients, thus revealing a new role of SMURF1 in NAFLD pathogenesis.