One third of the population in the United States has nonalcoholic fatty liver disease (NAFLD). Nonalcoholic steatohepatitis (NASH), the progressive form of NAFLD, can lead to cirrhosis.Currently, there is no proven therapy for patients with NASH. The investigators core hypothesis is that therapy of patients with NASH with pentoxifylline (PTX) for one year will result in improvement of biochemical parameters of liver disease and hepatic histology. The focus of this proposal is on the effectiveness of pentoxifylline (PTX) in improving laboratory and tissue parameters of liver disease, parameters of insulin-resistance, and levels of cytokines in patients with NASH.

Inclusion Criteria:

• Male and female patients ages 18 to 70 years.
• Liver biopsy compatible with NASH, including presence of steatosis and necroinflammatory activity on liver biopsy done during the prior 6 months to study enrollment
• Daily alcohol intake of <30 g for males and <15 g for females;
• Appropriate exclusion of other liver diseases.
• Patients with diabetes mellitus type 2 diagnosis as defined by a previous diagnosis of DM and current therapy with antidiabetic agents, or by fulfillment of 1997 American Diabetic Association (ADA) criteria, may be included if they fulfill the following criteria: (i) therapeutic regimen limited to specific oral agents including sulfonylureas (e.g. glipizide and glyburide) and/or biguanides (e.g. metformin); (ii) stable therapeutic regimen as defined by no changes in oral agents for at least 3 months; (iii) Hemoglobin A1C (HgbA1C) < 8.5 %.

Exclusion Criteria:

• History of past excessive alcohol drinking (as defined above) for a period longer than 2 years at any time in the past 10 years.
• Current consumption of alcohol >30 g daily for males and >15 g daily for females.
• Positive testing for hepatitis B surface antigen, hepatitis C virus antibody, or ribonucleic acid (RNA) of hepatitis C virus of deoxyribonucleic acid (DNA) of hepatitis B virus.
• Patients taking medications known to cause steatosis.
• Other causes of liver disease suspected by history, family interview, or laboratory testing.
• Patients with cirrhosis defined by stage 4 fibrosis on liver biopsy, or if the patient shows unequivocal clinical evidence of portal hypertension, such as thrombocytopenia, splenomegaly, or esophageal varices.
• Patients taking medications of possible benefit in NASH within 3 months prior to the liver biopsy. These medications include Vitamin E, Betaine, S-adenosylmethionine (SAM-e), thiazolidinediones, and acarbose.
• Patients with diabetes mellitus who are on Insulin therapy.
• Patients with diabetes mellitus on therapy with thiazolidinediones or alpha-glucosidase inhibitors such as acarbose
• Hypersensitivity to pentoxifylline or the methylxanthines (caffeine, theophylline, theobromine).
• History of cerebral or retinal hemorrhage.
• Other medical comorbidities (such as cardiac, central nervous system, renal, cancer) that would interfere with completion of the study.
• Patients taking Theophylline or Coumadin because of potential drug-drug interactions with Pentoxifylline.
• Pregnant or nursing women.