Nonalcoholic fatty liver disease (NAFLD) encompasses a spectrum of pathologies, ranging from steatosis to nonalcoholic steatohepatitis (NASH). The factors promoting the progression of steatosis to NASH are still unclear. Recent studies suggest that mitochondrial lipid composition is critical in NASH development. Here, we showed that CDP-DAG synthase 2 (Cds2) was downregulated in genetic or diet-induced NAFLD mouse models. Liver-specific deficiency of Cds2 provoked hepatic steatosis, inflammation and fibrosis in five-week-old mice. CDS2 is enriched in mitochondria-associated membranes (MAMs), and hepatic Cds2 deficiency impaired mitochondrial function and decreased mitochondrial PE levels. Overexpression of phosphatidylserine decarboxylase (PISD) alleviated the NASH-like phenotype in Cds2^f/f;AlbCre mice and abnormal mitochondrial morphology and function caused by CDS2 deficiency in hepatocytes. Additionally, dietary supplementation with an agonist of peroxisome proliferator-activated receptor alpha (PPARα) attenuated mitochondrial defects and ameliorated the NASH-like phenotype in Cds2^f/f;AlbCre mice. Finally, Cds2 overexpression protected against high-fat diet-induced hepatic steatosis and obesity. Thus, Cds2 modulates mitochondrial function and NASH development.