Overdose of acetaminophen (APAP), the active ingredient of Tylenol, is the leading cause of drug‐induced acute liver failure in the United States. As such, it is necessary to develop novel strategies to prevent or manage APAP toxicity. In this report, we reveal a novel function of the liver X receptor (LXR) in preventing APAP‐induced hepatotoxicity. Activation of LXR in transgenic (Tg) mice or by an LXR agonist conferred resistance to the hepatotoxicity of APAP, whereas the effect of LXR agonist on APAP toxicity was abolished in LXR‐deficient mice. The increased APAP resistance in LXR Tg mice was associated with increased APAP clearance, increased APAP sulfation, and decreased formation of toxic APAP metabolites. The hepatoprotective effect of LXR may have resulted from the induction of antitoxic phase II conjugating enzymes, such as Gst and Sult2a1, as well as the suppression of protoxic phase I P450 enzymes, such as Cyp3a11 and Cyp2e1. Promoter analysis suggested the mouse Gst isoforms as novel transcriptional targets of LXR. The suppression of Cyp3a11 may be accounted for by the inhibitory effect of LXR on the PXR‐responsive transactivation of Cyp3a11. The protective effect of LXR in preventing APAP toxicity is opposite to the sensitizing effect of pregnane X receptor, constitutive androstane receptor, and retinoid X receptor alpha. Conclusion: We conclude that LXR represents a potential therapeutic target for the prevention and treatment of Tylenol toxicity. (HEPATOLOGY 2011)