The addition of 1 per cent orotic acid to a sucrose-enriched semipurified diet results in markedly fatty liver when fed to rats for 7 to 22 days. Light microscopy reveals lipid droplets, mostly small, distributed throughout the cytoplasm of all hepatocytes. Electron microscopy shows that all the endoplasmic reticulum (ER) is broken into vesicles. Within the interior (cisterna) of each vesicle one or more lipid droplets are present. Morphologic signs of normal lipid transport (ER to Golgi apparatus to space of Disse) disappear: the Golgi elements are flattened and lack very low density lipoproteins particles; the Golgi-derived secretory vacuoles are not present. Biochemical analyses show an increase in hepatic triacylglycerol levels, to approximately 8 times the levels of sucrose-fed controls by the 7th day, 18 times by the 15th day, and 25 times by the 22nd day. Hepatic cholesterol levels increase, 2- to 4-fold. Serum triacylglycerol levels fall markedly; serum cholesterol levels are reduced. Immunoelectrophoretic determinations show that the apoprotein B component of plasma lipoproteins is practically absent at 7 days and increases slightly at 22 days. Reversal of an orotic acid-induced fatty liver is achieved by adding ethyl chlorophenoxyisobutyrate (clofibrate or CPIB) to the diet. By 8 to 16 days the ER of the hepatocytes returns to its usual parallel configuration and lipid droplets are not seen within its cisternae. Morphologic features of normal lipid transport reappear. GERL becomes prominent, distended with small particles, interpreted as lipid undergoing degradation. Lipid-containing residual bodies are common. Peroxisomes are more numerous than in hepatocytes of control rats. Liver triacylglycerol levels approach sucrose-fed control levels, and serum triacylglycerol levels return to chow-fed control levels. Hepatic cholesterol levels are similar to those of sucrose-fed and chow-fed controls, whereas serum cholesterol levels are lower. Serum apoprotein B levels return to chow-fed control levels. A sequence of events terminating in the removal of lipid from the hepatocytes is suggested by observation of morphologic changes following chlorophenoxyisobutyrate administration. This appears to involve transport of lipid into the cytosol where it accumulates as large spheres. Extensive accumulations of smooth ER appear. The cytosol lipid then disappears as the rough ER develops. Peroxisomes and mitochondria are prominent during the reversal process.