Nonalcoholic fatty liver disease (NAFLD) is the most common chronic liver disease in the United States and many other parts of the world. Its prevalence continues to rise-currently affecting approximately 20 to 30% of adults and 10% of children in the United States. NAFLD represents a wide spectrum of conditions ranging from fatty liver, which in general follows a benign nonprogressive clinical course, to steatohepatitis or NASH, a more serious form of NAFLD that may progress to cirrhosis and end-stage liver disease. Although currently a combination of noninvasive clinically available laboratory and imaging tests may help in the diagnostic evaluation of a patient with suspected NAFLD, a liver biopsy remains the only reliable way to precisely diagnose NASH and establish the severity of liver injury and presence of fibrosis. It also provides important information regarding prognosis as well as response to therapeutic interventions. However, a liver biopsy is an invasive and costly procedure, which is poorly suited as a diagnostic test for a condition that may affect about one-third of the U.S. population. This review provides a concise overview of the role of liver biopsy versus noninvasive diagnostic tools for the differentiation of fatty liver from nonalcoholic steatohepatitis as well as for the determination of presence and extent of fibrosis. In particular, this review focuses on the methods currently available in daily clinical practice in hepatology and touches briefly on potential future markers under investigation.