BACKGROUND Non-alcoholic fatty liver disease (NAFLD) is highly prevalent in people with diabetes with no available treatment. OBJECTIVE To explore the effect of testosterone treatment on liver. Testosterone therapy improves insulin resistance and reduces total body fat, but its impact on the liver remains poorly studied. METHODS This secondary analysis of a 40 wk, randomised, double-blinded, placebo-controlled trial of intramuscular testosterone undecanoate in men with type 2 diabetes and lowered serum testosterone concentrations evaluated the change in hepatic steatosis as measured by liver fat fraction on magnetic resonance imaging (MRI). RESULTS Of 88 patients enrolled in the index study, 39 had liver MRIs of whom 20 received testosterone therapy and 19 received placebo. All patients had > 5% hepatic steatosis at baseline and 38 of 39 patients met diagnostic criteria for NAFLD. Median liver fat at baseline was 15.0% (IQR 11.5%-21.1%) in the testosterone and 18.4% (15.0%-28.9%) in the placebo group. Median ALT was 34units/L (26-38) in the testosterone and 32units/L (25-52) in the placebo group. At week 40, patients receiving testosterone had a median reduction in absolute liver fat of 3.5% (IQR 2.9%-6.4%) compared with an increase of 1.2% in the placebo arm (between-group difference 4.7% P < 0.001). After controlling for baseline liver fat, testosterone therapy was associated with a relative reduction in liver fat of 38.3% (95% confidence interval 25.4%-49.0%, P < 0.001). CONCLUSIONS Testosterone therapy was associated with a reduction in hepatic steatosis in men with diabetes and low serum testosterone. Future randomised studies of testosterone therapy in men with NAFLD focusing on liver-related endpoints are therefore justified.