CONTEXT: Saturated fatty acid (SFA) vs polyunsaturated fatty acid (PUFA) may promote nonalcoholic fatty liver disease by yet unclear mechanisms. OBJECTIVE: To investigate if overeating SFA- and PUFA-enriched diets lead to differential liver fat accumulation in overweight and obese humans. DESIGN: Double-blind randomized trial (LIPOGAIN-2). Overfeeding SFA vs PUFA for 8 weeks, followed by 4 weeks of caloric restriction. SETTING: General community. PARTICIPANTS: Men and women who are overweight or have obesity (n = 61). INTERVENTION: Muffins, high in either palm (SFA) or sunflower oil (PUFA), were added to the habitual diet. MAIN OUTCOME MEASURES: Lean tissue mass (not reported here). Secondary and exploratory outcomes included liver and ectopic fat depots. RESULTS: By design, body weight gain was similar in SFA (2.31 ± 1.38 kg) and PUFA (2.01 ± 1.90 kg) groups, P = 0.50. SFA markedly induced liver fat content (50% relative increase) along with liver enzymes and atherogenic serum lipids. In contrast, despite similar weight gain, PUFA did not increase liver fat or liver enzymes or cause any adverse effects on blood lipids. SFA had no differential effect on the accumulation of visceral fat, pancreas fat, or total body fat compared with PUFA. SFA consistently increased, whereas PUFA reduced circulating ceramides, changes that were moderately associated with liver fat changes and proposed markers of hepatic lipogenesis. The adverse metabolic effects of SFA were reversed by calorie restriction. CONCLUSIONS: SFA markedly induces liver fat and serum ceramides, whereas dietary PUFA prevents liver fat accumulation and reduces ceramides and hyperlipidemia during excess energy intake and weight gain in overweight individuals.