Fatty liver disease is a problem of growing clinical importance due to its association with the increasingly prevalent conditions of obesity and diabetes. While steatosis represents a reversible state of excess intrahepatic lipid, it is also associated with increased susceptibility to oxidative and cytokine stresses and progression to irreversible hepatic injury characterized by steatohepatitis, cirrhosis, and malignancy. Currently, the molecular mechanisms underlying progression of this dynamic disease remain poorly understood, particularly at the level of transcriptional regulation. We recently constructed a library of stable monoclonal green fluorescent protein (GFP) reporter cells that enable transcriptional regulation to be studied dynamically in living cells. Here, we adapt the reporter cells to create a model of steatosis that will allow investigation of transcriptional dynamics associated with the development of steatosis and the response to subsequent "second hit" stresses. The reporter model recapitulates many cellular features of the human disease, including fatty acid uptake, intracellular triglyceride accumulation, increased reactive oxygen species accumulation, decreased mitochondrial membrane potential, increased susceptibility to apoptotic cytokine stresses, and decreased proliferation. Finally, to demonstrate the utility of the reporter cells for studying transcriptional regulation, we compared the transcriptional dynamics of nuclear factor kappa B (NF kappa B), heat shock response element (HSE), and glucocorticoid response element (GRE) in response to their classical inducers under lean and fatty conditions and found that intracellular lipid accumulation was associated with dose-dependent impairment of NF kappa B and HSE but not GRE activation. Thus, steatotic reporter cells represent an efficient model for studying transcriptional responses and have the potential to provide important insights into the progression of fatty liver disease.