Nonalcoholic fatty liver disease (NAFLD) represents a spectrum of conditions ranging from simple steatosis (NAFL), over nonalcoholic steatohepatitis (NASH) with or without fibrosis, to cirrhosis with end-stage disease. The hepatic molecular events underlying the development of NAFLD and transition to NASH are poorly understood. The present study aimed to determine hepatic transcriptome dynamics in patients with NAFL or NASH compared with healthy normal-weight and obese individuals. RNA sequencing and quantitative histomorphometry of liver fat, inflammation and fibrosis were performed on liver biopsies obtained from healthy normal-weight ( n = 14) and obese ( n = 12) individuals, NAFL ( n = 15) and NASH ( n = 16) patients. Normal-weight and obese subjects showed normal liver histology and comparable gene expression profiles. Liver transcriptome signatures were largely overlapping in NAFL and NASH patients, however, clearly separated from healthy normal-weight and obese controls. Most marked pathway perturbations identified in both NAFL and NASH were associated with markers of lipid metabolism, immunomodulation, extracellular matrix remodeling, and cell cycle control. Interestingly, NASH patients with positive Sonic hedgehog hepatocyte staining showed distinct transcriptome and histomorphometric changes compared with NAFL. In conclusion, application of immunohistochemical markers of hepatocyte injury may serve as a more objective tool for distinguishing NASH from NAFL, facilitating improved resolution of hepatic molecular changes associated with progression of NAFLD. NEW & NOTEWORTHY Nonalcoholic fatty liver disease (NAFLD) is the most common liver disease in Western countries. NAFLD is associated with the metabolic syndrome and can progress to the more serious form, nonalcoholic steatohepatitis (NASH), and ultimately lead to irreversible liver damage. Using gold standard molecular and histological techniques, this study demonstrates that the currently used diagnostic tools are problematic for differentiating mild NAFLD from NASH and emphasizes the marked need for developing improved histological markers of NAFLD progression.