Aldehyde dehydrogenase 2 (ALDH2), an acetaldehyde dehydrogenase in mitochondria, is primarily responsible for metabolizing alcohol-derived acetaldehyde and other endogenous aldehydes. Inactivating ALDH2 rs671 polymorphism is found in up to 8 % of the global population and 40 % of the East Asian population. Recent studies have shown that rs671 SNP mutation in the human ALDH2 gene is associated with an increased risk of metabolic dysfunction-associated steatotic liver diseases (MASLD), but the mechanism remains unclear. Here, we identify the role of ALDH2 in MASLD. Firstly, ALDH2 activity was lower in MASLD patients and the methionine-choline deficiency (MCD) diet induced MASLD model. Secondly, activation of ALDH2 activity with Alda-1 (ALDH2 agonist) attenuated MCD-diet induced hepatic triglyceride (TG) accumulation and steatosis, whereas the opposite result was observed with cyanamide (CYA, ALDH2 inhibitor). Furthermore, ALDH2 deficiency exacerbated hepatic steatosis, inflammation, and fibrosis in the MCD-diet induced mice. RNA sequencing (RNA-seq) revealed that oxysterol 7-α hydroxylase (Cyp7b1) and the related metabolic pathway significantly changed in the MCD-diet challenged ALDH2^−/− mice. In ALDH2^−/− mice, the expression of Cyp7b1 was downregulated and FXR/SHP signaling was inhibited, reducing the alternative bile acid (BA) synthetic pathway. In our in vitro experiments, knockdown of ALDH2 exacerbated TG accumulation in hepatocytes, whereas the opposite result was observed with overexpression of ALDH2. Moreover, chenodeoxycholic acid (CDCA) rescued ALDH2 downregulation induced TG accumulation in hepatocytes. Our study reveals that ALDH2 attenuates hepatocyte steatosis by regulating the alternative BA synthesis pathway, and ALDH2 may serve as a potential target for the treatment of MASLD.