Impaired hepatic fatty acids oxidation results in lipid accumulation and redox imbalance, promoting the development of fatty liver diseases and insulin resistance. However, the underlying pathogenic mechanism is poorly understood. Krüppel-like factor 16 (KLF16) is a transcription factor that abounds in liver. We explored whether and by what mechanisms KLF16 affects hepatic lipid catabolism to improve hepatosteatosis and insulin resistance. KLF16 expression was determined in patients with non-alcoholic fatty liver disease (NAFLD) and mice models. The role of KLF16 in the regulation of lipid metabolism was investigated using hepatocyte-specific KLF16-deficient mice fed a high-fat diet (HFD) or using an adenovirus/adeno-associated virus to alter KLF16 expression in mouse primary hepatocytes (MPHs) and in vivo livers. RNA-seq, luciferase reporter gene assay and ChIP analysis served to explore the molecular mechanisms involved. KLF16 expression was decreased in patients with NAFLD, mice models and oleic acid and palmitic acid (OA and PA) cochallenged hepatocytes. Hepatic KLF16 knockout impaired fatty acid oxidation, aggravated mitochondrial stress, ROS burden, advancing hepatic steatosis and insulin resistance. Conversely, KLF16 overexpression reduced lipid deposition and improved insulin resistance via directly binding the promoter of peroxisome proliferator-activated receptor α (PPARα) to accelerate fatty acids oxidation and attenuate mitochondrial stress, oxidative stress in db/db and HFD mice. PPARα deficiency diminished the KLF16-evoked protective effects against lipid deposition in MPHs. Hepatic-specific PPARα overexpression effectively rescued KLF16 deficiency-induced hepatic steatosis, altered redox balance and insulin resistance. These findings prove that a direct KLF16-PPARα pathway closely links hepatic lipid homeostasis and redox balance, whose dysfunction promotes insulin resistance and hepatic steatosis. © Author(s) (or their employer(s)) 2020. Re-use permitted under CC BY-NC. No commercial re-use. See rights and permissions. Published by BMJ.