Understanding the transition from fatty liver or steatosis to more advanced inflammatory and fibrotic stages of non-alcoholic fatty liver disease (steatohepatitis), is key to define strategies that alter or even reverse the progression of this pathology. The Liver X Receptor alpha (LXRα) controls hepatic lipid homeostasis and inflammation. Here we show that mice carrying a mutation that abolishes phosphorylation at Ser196 (S196A) in LXRα exhibit reduced hepatic inflammation and fibrosis when challenged with a high fat-high cholesterol diet, despite displaying enhanced hepatic lipid accumulation. This protective effect is associated with reduced cholesterol accumulation, a key promoter of lipid-mediated hepatic damage. Reduced steatohepatitis in S196A mice involves the reprogramming of the liver transcriptome by promoting diet-induced changes in the expression of genes involved in endoplasmic reticulum stress, extracellular matrix remodelling, inflammation and lipid metabolism. Unexpectedly, changes in LXRα phosphorylation uncover novel diet-specific target genes, whose regulation does not simply mirror ligand-induced LXR activation. These unique LXRα phosphorylation-sensitive, diet-responsive target genes are revealed by promoting LXR occupancy and cofactor recruitment in the context of a cholesterol-rich diet. Therefore, LXRα phosphorylation at Ser196 critically acts as a novel nutritional sensor that promotes a unique diet-induced transcriptome thereby modulating metabolic, inflammatory and fibrotic responses important in the transition to steatohepatitis.