Activation of inflammation is an important mechanism in the development of nonalcoholic steatohepatitis (NASH). This study aims to delineate how mitophagy affects NLRP3 inflammasome activation in hepatic lipotoxicity. Mice were fed a high fat/calorie diet (HFCD) for 24 weeks. Primary rat hepatocytes were treated with palmitic acid (PA) for various periods of time. Mitophagy was measured by protein levels of LC3II and P62. NLRP3, caspase-1, interleukin (IL)-18, and IL-1β at mRNA and protein levels were used as indicators of inflammasome activation. Along with steatotic progression in HFCD-fed mice, ratio of LC3II/β-actin was decreased concurrently with increased levels of liver P62, NLRP3, caspase-1, IL-1β, IL-18, and serum IL-1β levels in late-stage NASH. PA treatment resulted in mitochondrial oxidative stress and initiated mitophagy in primary hepatocytes. The addition of cyclosporine A did not change LC3II/Τοmm20 ratios; but P62 levels were increased after an extended duration of PA exposure, indicating a defect in autophagic activity. Along with impaired mitophagy, mRNA and protein levels of NLRP3, caspase-1, IL-18 and IL-1β were upregulated by PA treatment. Pretreatment with MCC950, N-acetyl cysteine or acetyl-l-carnitine reversed inflammasome activation and a pyroptotic cascade. Additionally, mitophagic flux was partially recovered as indicated by increases in LC3II/Tomm20 ratio, parkin, and PINK1 expression, and decreased P62 expression. The findings suggest that impaired mitophagy triggers hepatic NLRP3 inflammasome activation in a murine NASH model and primary hepatocytes. The new insights into inflammasome activation through mitophagy advance our understanding of how fatty acids elicit lipotoxicity through oxidant stress and autophagy in mitochondria.