Nonalcoholic fatty liver disease (NAFLD) involves development of hepatic steatosis, fibrosis, and steatohepatitis. Because hepatic steatosis appears first in NAFLD animal models, the current therapy development focuses on inhibition of hepatic steatosis, suggesting that further steps of NAFLD will be also inhibited. In this report, we show that the first event of NAFLD is liver proliferation, which drives fibrosis in NAFLD. We have deleted a strong driver of liver proliferation, gankyrin (Gank), and examined development of NAFLD in this animal model under conditions of a high‐fat diet (HFD). We found that proliferating livers of wild‐type mice develop fibrosis; however, livers of Gank liver‐specific knockout (GLKO) mice with reduced proliferation show no fibrosis. Interestingly, an HFD causes the development of strong macrovesicular steatosis in GLKO mice and is surprisingly associated with improvements in animal health. We observed that key regulators of liver biology CCAAT/enhancer binding protein α (C/EBPα), hepatocyte nuclear factor 4α (HNF4α), p53, and CUG repeat binding protein 1 (CUGBP1) are elevated due to the deletion of Gank and that these proteins support liver functions leading to healthy conditions in GLKO mice under an HFD. To examine the role of one of these proteins in the protection of liver from fibrosis, we used CUGBP1‐S302A knockin mice, which have a reduction of CUGBP1 due to increased degradation of this mutant by Gank. These studies show that reduction of CUGBP1 inhibits steatosis and facilitates liver proliferation, leading to fibrosis and the development of liver tumors. Conclusion: Liver proliferation drives fibrosis, while steatosis might play a protective role. Therapy for NAFLD should include inhibition of proliferation rather than inhibition of steatosis.