Fatty liver, or hepatic steatosis, is an alarmingly common pathology in western societies, in large part because if left unheeded, it can lead to life-threatening forms of nonalcoholic fatty liver disease, including nonalcoholic steatohepatitis, fibrosis, cirrhosis, and hepatocellular carcinoma. As such, it is essential that we attain a greater understanding of the pathways that control energy partitioning in the liver and ultimately how they are impacted by environmental factors. Here, we define the essential requirement for a member of the Ras-related protein in the brain (RAB)-like (RABL) clade of small GTPases, RABL2, in fatty acid metabolism including in microtubule-associated mitochondrial movement within the liver. RABL2 dysfunction, even in mice fed a low-fat chow diet, leads to retarded hepatic mitochondria movement associated with and a cascading phenotype of interrelated metabolic defects reminiscent of a type 2 diabetic state: hepatic steatosis, insulin resistance, glucose intolerance, and adult onset obesity. RABL2 dysfunction does not, however, alter mitochondrial content, or the inherent respiratory capacity of individual mitochondria per se. Rather, it is associated with a decreased capacity for fatty oxidation in the context of the intact cell, suggesting a complex, and important, role for mitochondrial movement in metabolic health. Our data highlight the importance of RABL2 and mitochondrial dynamics in hepatic fatty acid oxidation and in the achievement of metabolic balance.