Inflammatory signaling pathways are tightly regulated to avoid chronic inflammation and the development of disease. OTULIN is a deubiquitinating enzyme that controls inflammation by cleaving linear ubiquitin chains generated by the linear ubiquitin chain assembly complex. Here, we show that ablation of OTULIN in liver parenchymal cells in mice causes severe liver disease which is characterized by liver inflammation, hepatocyte apoptosis, and compensatory hepatocyte proliferation, leading to steatohepatitis, fibrosis, and hepatocellular carcinoma (HCC). Genetic ablation of Fas-associated death domain (FADD) completely rescues and knockin expression of kinase inactive receptor-interacting protein kinase 1 (RIPK1) significantly protects mice from developing liver disease, demonstrating that apoptosis of OTULIN-deficient hepatocytes triggers disease pathogenesis in this model. Finally, we demonstrate that type I interferons contribute to disease in hepatocyte-specific OTULIN-deficient mice. Our study reveals the critical importance of OTULIN in protecting hepatocytes from death, thereby preventing the development of chronic liver inflammation and HCC.