The mechanisms underlying the association of steatotic liver disease with cardiovascular and cancer outcomes are poorly understood. We aimed to use MRI-derived measures of liver fat and genetics to investigate causal mechanisms that link higher liver fat to various health outcomes. We conducted a genome-wide association study on 37,358 UK Biobank participants to identify genetic variants associated with liver fat measured from MRI scans. We used a Mendelian randomisation approach to investigate the causal effect of liver fat on health outcomes independent of BMI, alcohol consumption and lipids using data from published genome-wide association studies and FinnGen. We identified 13 genetic variants associated with liver fat that had differing effects on the risks of health outcomes. Genetic variants associated with impaired hepatic triglyceride export showed liver fat-increasing alleles to be correlated with a reduced risk of coronary artery disease and myocardial infarction but an elevated risk of type 2 diabetes, while variants associated with enhanced de novo lipogenesis showed liver fat-increasing alleles to be linked to a higher risk of myocardial infarction and coronary artery disease. Genetically higher liver fat content increased the risk of non-alcohol-related cirrhosis, hepatocellular carcinoma, and intrahepatic bile duct and gallbladder cancers, exhibiting a dose-dependent relationship, irrespective of the mechanism. This study provides fresh insight into the heterogeneous effect of liver fat on health outcomes. It challenges the notion that liver fat per se is an independent risk factor for cardiovascular disease, underscoring the dependency of this association on the specific mechanisms that drive fat accumulation in the liver. However, excess liver fat, regardless of the underlying mechanism, appears to be causally linked to cirrhosis and cancers in a dose-dependent manner. This research advances our understanding of the heterogeneity in mechanisms influencing liver fat accumulation, providing new insights into how liver fat accumulation may impact various health outcomes. The findings challenge the notion that liver fat is an independent risk factor for cardiovascular disease and highlight the mechanistic effect of some genetic variants on fat accumulation and the development of cardiovascular diseases. This study is of particular importance for healthcare professionals including physicians and researchers, as well as patients, as it allows for more targeted and personalised treatment by understanding the relationship between liver fat and various health outcomes. The findings emphasise the need for a personalised management approach and a reshaping of risk assessment criteria. It also provides room for prioritising a clinical intervention aimed at reducing liver fat content (likely via intentional weight loss) that could help protect against liver-related fibrosis and cancer. Display omitted •Genetic analysis of UK Biobank MRI data revealed 13 variants associated with liver fat.•Key mechanisms for liver fat accumulation include lipid retention and enhanced de novo lipogenesis.•Impaired triglyceride export lowers cardiovascular risk, while enhanced de novo lipogenesis increases it.•Higher liver fat is causally linked to non-alcoholic cirrhosis, liver cancers, and type 2 diabetes, regardless of the underlying mechanism.•Findings indicate the need for personalized treatment and risk assessment based on liver fat accumulation mechanisms.