This study aimed to investigate the therapeutic effect of quercetin on ethanol‐induced hepatic steatosis in L02 cells and elucidate the potential mechanism. In brief, L02 cells were pretreated with or without ethanol (3%) for 24 h, then treated quercetin (80, 40, 20 μM) for 24 h. The transfection procedure was performed with transcription factor EB (TFEB) small interfering RNA (siRNA TFEB) for 24 h. Our results showed that quercetin autophagic flux in the L02 cells, via upregulating of microtubule associated protein light chain 3B (LC3‐II) and lysosome‐associated membrane protein 1 (LAMP1), then downregulating of protein sequestosome 1 (SQSTM1/p62). Mechanistically, quercetin activated TFEB nuclear translocation, contributing to lysosomal biogenesis and autophagic activation. Accordingly, the genetic inhibition of TFEB‐dependent autophagy decreased ethanol‐induced fat accumulation in L02 cells via regulating fatty acid β oxidation and lipid synthesis. Subsequently, quercetin‐induced TFEB‐dependent autophagic activation was also linked to inhibit oxidative stress via suppressing reactive oxygen species (ROS), enhancing activities of antioxidant enzymes, and promoting nuclear transfer of the nuclear factor E2‐related factor 2 (Nrf2) translocation. Thus, we uncovered a novel protective mechanism against ethanol‐induced hepatic steatosis and oxidative stress through TFEB‐mediated lysosomal biogenesis and discovered insufficient autophagy as a novel previously unappreciated autophagic flux.