Abstract Myotonic Dystrophy type 1 (DM1) is multi-systemic muscular dystrophy, affecting 1 in 3000 people, characterized by muscle wasting, myotonia, cardiac and gastrointestinal abnormalities and cognitive impairment, among other symptoms. DM1 is caused by a (CTG)n repeat expansion in the 3’ UTR of the ubiquitously expressed gene DMPK. The (CUG)n containing RNAs resulting from the transcription of this diseased DMPK gene aggregate in the nucleus, forming foci which sequester muscleblind-like (MBNL) family proteins, a group of splicing factors that play significant roles in the juvenile-to-adult development of many tissues. Recent studies show that DM1 patients have increased susceptibility toward glucose intolerance, non-alcoholic fatty liver disease (NAFLD), and metabolic syndrome. Furthermore, DM1 patients are abnormally sensitive to a wide range of analgesics and anesthetics, with complications ranging from prolonged anesthesia recovery to heightened pulmonary dysfunction. These findings suggest a predisposition for liver damage and dysfunction in DM1 patients; however, this possibility has gone uninvestigated. To understand the effects of DM1 in the liver, we generated a hepatocyte-specific DM1 mouse model in which we can induce the expression of CUG containing RNA, specifically in the liver. Through these mice, we demonstrate that the expression of the toxic RNA in hepatocytes sequesters MBNL proteins, causing a reduction in mature hepatocellular activity, however, we find that, in contrast to other tissues, loss of MBNL1 activity only reproduces a small portion of the transcriptome changes in DM1 afflicted hepatocytes. We characterized the transcriptomic changes driven by DM1 in the liver and show that these lead to changes in hepatocellular morphology, inflammation, and necrosis, as well as excessive lipid accumulation and fatty liver disease. We further demonstrate that DM1 mice livers are defective in drug metabolism and clearance, and when challenged, exhibit marked impairment against zoxazolamine-induced paralysis and acetaminophen-induced hepatotoxicity. Together, these results reveal that the expression of CUG repeat containing RNA disrupts the normal hepatic functions and predisposes the liver to injury, fatty liver disease, and drug clearance pathologies that may jeopardize the health of DM1 patients and complicate the treatment of DM1.