Background: Nonalcoholic fatty liver disease (NAFLD) is associated with decreased insulin sensitivity. However, the association between NAFLD and pancreatic β-cell function is still ambiguous. Here, we assessed whether pancreatic β-cell function is associated with NAFLD. Method: The data of NHANES III from 1988 to 1994 were used. NAFLD was diagnosed when subjects had ultrasonographically hepatic steatosis without other liver diseases. Disposition index (DI) was employed to assess pancreatic β-cell function. A total of 6168 participants were included in this study. Results: NAFLD participants had much higher HOMA2-%B (weighted mean, 124.1; standard error, 1.8) than the non-NAFLD participants (weighted mean, 100.7; standard error, 0.9). However, when evaluating the β-cell function in the context of insulin resistance by using DI index, DI levels were much lower in NAFLD subjects (weighted mean, 79.5; standard error, 1.0) compared to non-NAFLD (weighted mean, 95.0; standard error, 0.8). Multivariate logistic regression analyses showed that DI was inversely associated with NAFLD prevalence. The adjusted OR (95% CI) for quartile 1 versus quartile 4 was 1.81 (1.31–2.50) (p < 0.001 for trend). Moreover, DI was also inversely associated with the presence of moderate to severe hepatic steatosis. The multivariable-adjusted ORs across quartiles of DI were 2.47, 1.44, 0.96 and 1.00 for the presence of moderate to severe hepatic steatosis (p < 0.001 for trend). Conclusions: Pancreatic β-cell function might be a new predictor for the presence of NAFLD, and insufficient compensatory β-cell function is associated with NAFLD.