Formononetin has been reported to ameliorate hyperlipidemia and obesity, but its effect and mechanism of action in anti-non-alcoholic fatty liver disease (NAFLD) remain unclear. Lipophagy is a critical protective mechanism during steatosis development that results in the decomposition of lipid droplets through autophagy and the prevention of cellular lipid accumulation. This study aimed to investigate the beneficial role of formononetin in treating NAFLD and explore the mechanism of lipophagy in formononetin anti-hepatic steatosis effects. Formononetin treatment significantly ameliorated hepatic steatosis in HFD mice. Consistently, formononetin also reduced FFAs-stimulated lipid accumulation in HepG2 cells and primary mouse hepatocytes. Further analysis revealed that steatosis increased LC3B-II, a marker of autophagy, but caused blockade of autophagic flux associated with a lack of lysosomes. Treatment with formononetin promoted lysosome biogenesis and autophagosome-lysosome fusion, relieving the blockade in autophagic flux and further induced lipophagy. Mechanistically, formononetin activated adenosine monophosphate activated protein kinase (AMPK) and promoted subsequent nuclear translocation of transcription factor EB (TFEB), a key regulator of lysosome biogenesis. TFEB inhibition markedly abolished formononetin-induced lysosome biogenesis, autophagosome-lysosome fusion and lipophagy and concomitantly alleviated lipid accumulation. Formononetin improved hepatic steatosis via TFEB-mediated lysosome biogenesis, which provides new evidence regarding formononetin's anti-NAFLD effects.