Weight loss that occurs with fatty liver disease can be due to a few different factors. Nausea and vomiting that occur can inhibit the appetite, causing rapid weight loss.Muscle wasting occurs with severe liver disease. This muscle wasting is typically seen first in the arms and legs. It can give the appearance of fat loss, but is really the muscle tissue breaking down. Unexplained weight loss due to muscle wasting is one of the signs of advanced liver disease.Next