Inclusion Criteria:

• Male and female patients ages 18 to 70 years.
• Liver biopsy compatible with NASH, including presence of steatosis and necroinflammatory activity on liver biopsy done during the prior 6 months to study enrollment
• Daily alcohol intake of <30 g for males and <15 g for females;
• Appropriate exclusion of other liver diseases.
• Patients with diabetes mellitus type 2 diagnosis as defined by a previous diagnosis of DM and current therapy with antidiabetic agents, or by fulfillment of 1997 ADA criteria, may be included if they fulfill the following criteria: (i) therapeutic regimen limited to specific oral agents including sulfonylureas (e.g. glipizide and glyburide) and/or biguanides (e.g. metformin); (ii) stable therapeutic regimen as defined by no changes in oral agents for at least 3 months; (iii) HgbA1C < 8.5 %.

Exclusion Criteria:

• History of past excessive alcohol drinking (as defined above) for a period longer than 2 years at any time in the past 10 years.
• Current consumption of alcohol >30 g daily for males and >15 g daily for females.
• Positive testing for hepatitis B surface antigen, hepatitis C virus antibody, or RNA of hepatitis C virus of DNA of hepatitis B virus.
• Patients taking medications known to cause steatosis.
• Other causes of liver disease suspected by history, family interview, or laboratory testing.
• Patients with cirrhosis defined by stage 4 fibrosis on liver biopsy, or if the patient shows unequivocal clinical evidence of portal hypertension, such as thrombocytopenia, splenomegaly, or esophageal varices.
• Patients taking medications of possible benefit in NASH within 3 months prior to the liver biopsy. These medications include Vitamin E, Betaine, S-adenosylmethionine (SAM-e), thiazolidinediones, and acarbose.
• Patients with diabetes mellitus who are on Insulin therapy.
• Patients with diabetes mellitus on therapy with thiazolidinediones or alpha-glucosidase inhibitors such as acarbose
• Hypersensitivity to pentoxifylline or the methylxanthines (caffeine, theophylline, theobromine).
• History of cerebral or retinal hemorrhage.
• Other medical comorbidities (such as cardiac, central nervous system, renal, cancer) that would interfere with completion of the study.
• Patients taking Theophylline or Coumadin because of potential drug-drug interactions with Pentoxifylline.
• Pregnant or nursing women.