Peroxisomal beta-oxidation system consists of fc,ur consecutive reactions to preferentially metabolize very long chain fatty acids. The first step of this system, catalyzed by acyl-CoA oxidase (AOX), converts fatty acyl-CoA to 2-trans-enoyl-CoA. Herein, we show that mice deficient in AOX exhibit steatohepatitis, increased hepatic H2O2 levels, and hepatocellular regeneration, leading to a complete reversal of fatty change by 6 to 8 months of age. The liver of AOX-/- mice with regenerated hepatocytes displays profound generalized spontaneous peroxisome proliferation and increased mRNA levels of genes that are regulated by peroxisome proliferator-activated receptor alpha (PPAR alpha). Hepatic adenomas and carcinomas develop in AOX-/- mice by 15 months of age due to sustained activation of PPAR alpha. These observations implicate acyl-CoA and other putative substrates for AOX, as biological ligands for PPAR alpha; thus, a normal AOX gene is indispensable for the physiological regulation of PPAR alpha.