Nonalcoholic fatty liver disease (NAFLD) is the most common chronic liver disorder and is strongly associated with type 2 diabetes (T2D). Our recently engineered FGF1 partial agonist, carrying triple mutations (FGF1 △ HBS) exhibits greatly reduced proliferative potential, while preserving the full metabolic activity of wild-type FGF1. This study tests the preventive and therapeutic effects of FGF1 △ HBS on NAFLD in db/db T2D and explores potential mechanisms. The results showed that administration of FGF1 △ HBS to 2-monthold db/db mice for 2 months constantly lowered blood glucose levels, improved insulin sensitivity, and lowered liver weight, lipid deposition, and inflammation, along with improvement of liver function. Simultaneously, FGF1 △ HBS treatment prevented diabetesinduced hepatic oxidative stress along with promoting nuclear translocation of the antioxidant transcription factor Nrf2 and elevating its downstream antioxidant genes. In addition, FGF1 △ HBS administration inhibited the activity and/or expression of hepatic lipogenic genes including SREBP-1, FAS and SCD-1. Furthermore, FGF1 △ HBS treatment rescued hepatic fatty acid oxidation signaling, including elevated expressions of CPT-1α, PPARα and PGC-1α. Moreover, FGF1 △ HBS treatment greatly increased hepatic v phosphorylation of the key energy sensor AMPK, along with upregulating its downstream genes ACC and SREBP-1 phosphorylation, indicating that FGF1 △ HBS regulation of hepatic lipid metabolism is associated with AMPK signaling pathway. Mechanistically, hepatic cells treated with palmitate (Pal) mimicked the diabetic phenotype of hepatic oxidative damage and lipid disorder seen in db/db mice, all of which could be reversed by supplementing with FGF1 △ HBS. Knockdown of Nrf2 by SiRNA completely abolished the anti-oxidative capacity of FGF1 △ HBS but did not affect the beneficial effects of FGF1 △ HBS on Pal-induced lipid metabolic disorder. Whereas, AMPK knockdown by SiRNA completely abolished FGF1 △ HBS ability to prevent Pal-induced hepatic lipotoxicity and SREBP-1-mediated lipid metabolic disorder, along with inhibiting Nrf2-mediated antioxidative signaling pathway. Most importantly, administration of FGF1 △ HBS to 9-monthold db/db mice for 3 months completely reversed the phenotype of NAFLD along with activation on Nrf2 and AMPK signaling pathways. Our findings demonstrate that, in addition to its potent glucose-lowering and insulinsensitizing effects, FGF1 ΔHBS can reverse NAFLD in T2D, by its ability to upregulate AMPK to activate Nrf2-mediated antioxidative pathway and inhibit SREBP-1-mediated lipid metabolic pathway.