Dietary fatty acids are major contributors to the development and progression of insulin resistance and nonalcoholic fatty liver disease (NAFLD). Dietary fatty acids also alter hepatic NKT cells that are activated by antigens presented by CD1d. In the current study, we examine the mechanism of dietary fatty acid induced hepatic NKT cell deficiency and its causal relationship to insulin resistance and NAFLD. We discover that dietary saturated fatty acids (SFA) or monounsaturated fatty acids (MUFA), but not polyunsaturated fatty acids (PUFA), cause hepatic NKT cell depletion with increased apoptosis. Dietary SFA or MUFA also impair hepatocyte presentation of endogenous, but not exogenous, antigen to NKT cells, indicating alterations of the endogenous antigen processing or presenting pathway. In vitro treatment of normal hepatocytes with fatty acids also demonstrates impaired ability of CD1d to present endogenous antigen by dietary fatty acids. Furthermore, dietary SFA and MUFA activate the NFkappaB signaling pathway and lead to insulin resistance and hepatic steatosis. In conclusion, both dietary SFA and MUFA alter endogenous antigen presentation to hepatic NKT cells and contribute to NKT cell depletion, leading to further activation of inflammatory signaling, insulin resistance, and hepatic steatosis.