Fatty liver (FLD) disease is a consequence of metabolic syndrome, which is a health problem worldwide with a phenomenal rise in prevalence. In this study, two hepatoprotective polysaccharide-peptides were extracted from the mushroom Auricularia polytricha followed by chromatographic fractionation of the extract on the ion exchanger DEAE-cellulose and gel filtration on Sephadex-200 to yield two purified fractions: APPI and APPII. The monosaccharide compositions, FT-IR, N-terminal sequences, internal peptide sequences and molecular weights of the two fractions were determined. Furthermore, their hepatoprotective effect on human hepatoma HepG2 cells in vitro and in an animal model of fatty liver disease was evidenced by the findings that APPI and APPII diminished lipid deposit in cells, blood and the liver, increased cellular antioxidant activity and viability, and protected the liver against injury. The mechanistic study revealed that APPI and APPII activated the adiponectin pathway, up-regulated expression of genes controlling free fatty acid (FFA) oxidation, such as AMPK, CPTl, ACOX1 and PPARα genes, enhanced lipid metabolism, preserved hepatic function, promoted the antioxidant defense system and reduced lipid peroxidation. Hence the bioactive compounds of A. polytricha could serve as therapeutic agents in the food and pharmaceutical industries.