Patatin-like phospholipase domain-containing 3 (PNPLA3) rs738409 polymorphism (I148M) is strongly associated with non-alcoholic steatohepatitis and advanced fibrosis; however, the underlying mechanisms remain largely unknown. In this study, we investigated the effect of PNPLA3-I148M on the activation of hepatic stellate cell line LX-2 and the progression of liver fibrosis. Immunofluorescence staining and enzyme-linked immunosorbent assay were used to detect lipid accumulation. The expression levels of fibrosis, cholesterol metabolism, and mitochondria-related markers were measured via real-time PCR or western blotting. Electron microscopy was applied to analyze the ultrastructure of the mitochondria. Mitochondrial respiration was measured by a Seahorse XFe96 analyzer. PNPLA3-I148M significantly promoted intracellular free cholesterol aggregation in LX-2 cells by decreasing cholesterol efflux protein (ABCG1) expression; it subsequently induced mitochondrial dysfunction characterized by attenuated ATP production and mitochondrial membrane potential, elevated ROS levels, caused mitochondrial structural damage, altered the oxygen consumption rate, and decreased the expression of mitochondrial-function-related proteins. Our results demonstrated for the first time that PNPLA3-I148M causes mitochondrial dysfunction of LX-2 cells through the accumulation of free cholesterol, thereby promoting the activation of LX-2 cells and the development of liver fibrosis.