Nonalcoholic fatty liver disease is the most common liver disease in both adults and children. The earliest stage of this disease is hepatic steatosis, in which triglycerides are deposited as cytoplasmic lipid droplets in hepatocytes. Through a forward genetic approach in zebrafish, we found that guanosine monophosphate (GMP) synthetase mutant larvae develop hepatic steatosis. We further demonstrate that activity of the small GTPase Rac1 and Rac1-mediated production of reactive oxygen species (ROS) are down-regulated in GMP synthetase mutant larvae. Inhibition of Rac1 activity or ROS production in wild-type larvae by small molecule inhibitors was sufficient to induce hepatic steatosis. More conclusively, treating larvae with hydrogen peroxide, a diffusible ROS that has been implicated as a signaling molecule, alleviated hepatic steatosis in both GMP synthetase mutant and Rac1 inhibitor-treated larvae, indicating that homeostatic production of ROS is required to prevent hepatic steatosis. We further found that ROS positively regulate the expression of the triglyceride hydrolase gene, which is responsible for the mobilization of stored triglycerides in hepatocytes. Consistently, inhibition of triglyceride hydrolase activity in wild-type larvae by a small molecule inhibitor was sufficient to induce hepatic steatosis. Conclusion: de novo GMP synthesis influences the activation of the small GTPase Rac1, which controls hepatic lipid dynamics through ROS-mediated regulation of triglyceride hydrolase expression in hepatocytes.