Advanced liver fibrosis in nonalcoholic steatohepatitis (NASH) is often accompanied by a reduction in hepatic fat to the point of complete fat loss (burnt-out NASH), but the mechanisms behind this phenomenon have not been elucidated. Adiponectin is raised in cirrhosis of any cause and has potent antisteatotic activity. In this study we examined 65 patients with advanced biopsy-proven NASH (fibrosis stage 3-4) and 54 with mild disease (fibrosis stage 0-1) to determine if disappearance of steatosis correlated with changes in serum adiponectin. All patents had fasting blood tests and anthropometric measures at the time of liver biopsy. Liver fat was accurately quantitated by morphometry. Serum adiponectin was measured by immunoassay. When compared to those with early disease, patients with advanced NASH were more insulin-resistant, viscerally obese, and older, but there was no difference in liver fat content or adiponectin levels. Adiponectin had a significant negative correlation with liver fat percentage in the whole cohort (r = -0.28, P < 0.01), driven by patients with advanced NASH (r = -0.40, P < 0.01). In advanced NASH, for each 4 μg/L increase in adiponectin there was an odds ratio OR of 2.0 (95% confidence interval [CI]: 1.3-3.0, P < 0.01) for a 5% reduction in hepatic fat. Adiponectin was highly and significantly associated with almost complete hepatic fat loss or burnt-out NASH (12.1 versus 7.4 μg/L, P = 0.001) on multivariate analysis. A relationship between adiponectin, bile acids, and adipocyte fexaramine activation was demonstrated in vivo and in vitro, suggestive of hepatocyte-adipocyte crosstalk.