β-catenin regulates the establishment of hepatic metabolic zonation. To elucidate the functional significance of liver metabolic zonation in the chronically overfed state in vivo, we fed a high-fat diet (HFD) to hepatocyte-specific β-catenin transgenic (TG) and knockout (KO) mice. Chow-fed TG and KO mice had normal liver histologic findings and body weight. However, HFD-fed TG mice developed prominent perivenous steatosis with periportal sparing. In contrast, HFD-fed KO mice had increased lobular inflammation and hepatocyte apoptosis. HFD-fed TG mice rapidly developed diet-induced obesity and systemic insulin resistance, but KO mice were resistant to diet-induced obesity. However, β-catenin did not directly affect hepatic insulin signaling, suggesting that the metabolic effects of β-catenin occurred via a parallel pathway. Hepatic expression of key glycolytic and lipogenic genes was higher in HFD-fed TG and lower in KO mice compared with wild-type mice. KO mice also exhibited defective hepatic fatty acid oxidation and fasting ketogenesis. Hepatic levels of hypoxia inducible factor-1α, an oxygen-sensitive transcriptional regulator of glycolysis and a known β-catenin binding partner, were higher in HFD-fed TG and lower in KO mice. KO mice had attenuated perivenous hypoxia, suggesting disruption of the normal sinusoidal oxygen gradient, a major determinant of liver carbohydrate and liver metabolism. Canonical Wnt signaling in hepatocytes is essential for the development of diet-induced fatty liver and obesity.