This study investigated the role of inducible nitric oxide synthase (iNOS) in failure of ethanol-induced fatty liver grafts. Rat livers were explanted 20 h after gavaging with ethanol (5 g/kg) and storing in UW solution for 24 h before implantation. Hepatic Oil-Red-O staining-positive areas increased from ~2% to ~33% after ethanol treatment, indicating steatosis. iNOS expression increased ~8-fold after transplantation of lean grafts (LG) and 25-fold in fatty grafts (FG). Alanine aminotransferase release, total bilirubin, hepatic necrosis, TUNEL-positive cells and cleaved caspase-3 were higher in FG than LG. A specific iNOS inhibitor 1400W (5 μM in the cold-storage solution) blunted these alterations by >42% and increased survival of fatty grafts from 25% to 88%. Serum nitrite/nitrate and hepatic nitrotyrosine adducts increased to a greater extent after transplantation of FG than LG, indicating reactive nitrogen species (RNS) overproduction. Phospho-c-Jun and phospho-c-Jun N-terminal kinase-1/2 (JNK1/2) were higher in FG than in LG, indicating more JNK activation in fatty grafts. RNS formation and JNK activation were blunted by 1400W. Mitochondrial polarization and cell death were visualized by intravital multiphoton microscopy of rhodamine 123 and propidium iodide, respectively. After implantation, viable cells with depolarized mitochondria were 3-fold higher in FG than in LG and 1400W decreased mitochondrial depolarization in FG to the levels of LG. Taken together, iNOS is upregulated after transplantation of FG, leading to excessive RNS formation, JNK activation, mitochondrial dysfunction, and severe graft injury. The iNOS inhibitor 1400W could be an effective therapy for primary non-function of fatty liver grafts.