Recent evidence that excessive lipid accumulation can decrease cellular levels of autophagy and that autophagy regulates immune responsiveness suggested that impaired macrophage autophagy may promote the increased innate immune activation that underlies obesity. Primary bone marrow-derived macrophages (BMDM) and peritoneal macrophages from high-fat diet (HFD)-fed mice had decreased levels of autophagic flux indicating a generalized impairment of macrophage autophagy in obese mice. To assess the effects of decreased macrophage autophagy on inflammation, mice with a Lyz2-Cre-mediated knockout of Atg5 in macrophages were fed a HFD and treated with low-dose lipopolysaccharide (LPS). Knockout mice developed systemic and hepatic inflammation with HFD feeding and LPS. This effect was liver specific as knockout mice did not have increased adipose tissue inflammation. The mechanism by which the loss of autophagy promoted inflammation was through the regulation of macrophage polarization. BMDM and Kupffer cells from knockout mice exhibited abnormalities in polarization with both increased proinflammatory M1 and decreased anti-inflammatory M2 polarization as determined by measures of genes and proteins. The heightened hepatic inflammatory response in HFD-fed, LPS-treated knockout mice led to liver injury without affecting steatosis. These findings demonstrate that autophagy has a critical regulatory function in macrophage polarization that downregulates inflammation. Defects in macrophage autophagy may underlie inflammatory disease states such as the decrease in macrophage autophagy with obesity that leads to hepatic inflammation and the progression to liver injury.