Steatohepatitis is a morphological pattern of liver injury that may be seen in alcoholic or nonalcoholic liver disease. This pattern may occur with obesity, diabetes, the use of certain drugs, or the cause may be idiopathic. The well-recognized histopathological features of nonalcoholic steatohepatitis (NASH) include hepatocellular steatosis and ballooning, mixed acute and chronic lobular inflammation, and zone 3 perisinusoidal fibrosis. Currently, there are no systems for grading necroinflammatory activity or for staging fibrosis as exist for various other forms of chronic liver disease. The purpose of this study was to develop such a grading and staging system and was based on review of liver biopsies from 51 patients with nonalcoholic steatohepatitis from Saint Louis University Health Sciences Center. For determination of grade, 10 histological variables of activity were initially analyzed; an overall impression of mild, moderate, and severe was made and the variables considered to be most significant were used to develop the necroinflammatory grade. The histological lesions considered to be significant were: steatosis, ballooning, and intra-acinar and portal inflammation. A staging score was developed to reflect both location and extent of fibrosis. The fibrosis score was derived from the extent of zone 3 perisinusoidal fibrosis with possible additional portal/periportal fibrosis and architectural remodeling. Fibrosis stages are as follows: Stage 1, zone 3 perisinusoidal fibrosis; Stage 2, as above with portal fibrosis; Stage 3, as above with bridging fibrosis; and Stage 4, cirrhosis. We propose a grading and staging system that reflects the unique histological features of nonalcoholic steatohepatitis.