Inclusion Criteria:

1. Subjects must be willing to give written informed consent
2. Diagnosis of steatohepatitis Grade >= 1 (Brunt et al. criteria – Am J Gastroenterol 1999;94(9)2467-74) on biopsy within 6 months prior to entry into protocol
3. No histologic evidence of cirrhosis
4. Persistent ALT elevation (> 1.5 the upper limit normal) over 6 months prior to entry into study
5. Adult subjects 18-65 years of age of any race or gender

6. Compensated liver disease with the following hematologic, biochemical, and serological criteria on entry into protocol:

   • Hemoglobin > 11 gm/dL for females and > 12 gm/dL for males
   • White blood cell (WBC) > 2.5 K/UL
   • Neutrophil count > 1.5 K/UL
   • Platelets > 100 K/UL
   • Direct bilirubin, within normal limits
   • Indirect bilirubin within normal limits (unless non-hepatitis factors such as Gilbert's disease explain indirect bilirubin rise. In such cases total bilirubin must be < 3.0 mg/dL)
   • Albumin > 3.2 g/dL
   • Serum creatinine within normal limits
7. Hemoglobin A1c (HgbA1c) < 7%
8. Antinuclear antibodies (ANA) < 1:160
9. Anti-smooth muscle Ab negative
10. Serum hepatitis B surface antigen (HepBsAg) negative
11. Serum hepatitis C antibody (HepC Ab) negative
12. Iron/total iron binding capacity (TIBC) ratio (transferrin saturation) < 45%
13. Alpha-1-antitrypsin level within normal limits
14. Ceruloplasmin level within normal limits
15. Negative pregnancy test (females)
16. Concomitant use of lipid lowering agents at study entry will not exclude patients from the study.

Exclusion Criteria:

1. Evidence of decompensated cirrhosis
2. Active gastrointestinal (GI) bleeding
3. Renal failure (creatinine clearance < 80 mL/min)
4. Active alcohol or drug abuse
5. Uncontrolled diabetes (HgbA1c > 7)
6. Current treatment with anti-diabetic medications such as thiazolidinediones or metformin (stable doses of sulfonylureas are acceptable)
7. Current treatment with anti-TNF alpha medication (i.e. Remicade or Enbrel)
8. Current treatment with vitamin E
9. Alcohol consumption < 20 g/day (males) or < 10 g/day (females) - assessed by one physician and confirmed with one family member.
10. HIV positive status
11. Any history of cerebral and/or retinal hemorrhage
12. Prior intolerance of pentoxifylline or any other methylxanthine (i.e. caffeine, theophylline, or theobromine)
13. Current use of theophylline
14. Known diagnosis of malignancy
15. Any other conditions which the investigator feels would make the subject unsuitable for enrollment, or could interfere with the subject completing the protocol