Metabolic dysfunction-associated steatohepatitis (MASH), formerly known as nonalcoholic steatohepatitis (NASH), is an advanced stage of metabolic fatty liver disease. The pathogenic mechanisms of MASH center on hepatocyte injury and the ensuing immune response within the liver microenvironment. Recent work has implicated TREM2+ macrophages in various disease conditions, and substantial induction of TREM2+ NASH-associated macrophages (NAMs) serves as a hallmark of metabolic liver disease. Despite this, the mechanisms through which NAMs contribute to MASH pathogenesis remain poorly understood. Here, we identify membrane-spanning 4-domains a7 (MS4A7) as a NAM-specific pathogenic factor that exacerbates MASH progression in mice. Hepatic MS4A7 expression was strongly induced in mouse and human MASH and associated with the severity of liver injury. Whole-body and myeloid-specific ablation of Ms4a7 alleviated diet-induced MASH pathologies in male mice. We demonstrate that exposure to lipid droplets (LDs), released upon injury of steatotic hepatocytes, triggered NAM induction and exacerbated MASH-associated liver injury in an MS4A7-dependent manner. Mechanistically, MS4A7 drove NLRP3 inflammasome activation via direct physical interaction and shaped disease-associated cell states within the liver microenvironment. This work reveals the LD-MS4A7-NLRP3 inflammasome axis as a pathogenic driver of MASH progression and provides insights into the role of TREM2+ macrophages in disease pathogenesis.