Energy homeostasis is maintained through a dynamic interplay of substrate shuttling, breakdown, storage, and distribution. Thyroid hormones (THs) are central regulators of hepatic carbohydrate and lipid metabolism. In the adult mouse liver, local TH availability is primarily regulated by deiodinases, with Dio3 catalyzing the inactivation of THs. Dio3 expression is known to increase during fasting and in models of Western diet (WD)-induced metabolic dysfunction-associated steatotic liver disease (MASLD). Based on this, we hypothesized that hepatic TH availability and signaling critically influence systemic energy homeostasis. To test this, we used a hepatocyte-specific Dio3 knockout model (Alb-Cre; Dio3fl/fl; HepDio3KO) to locally manipulate T3 availability and assess its impact on energy metabolism under both fasting conditions and WD-induced MASLD. Our study revealed several novel findings: under normal chow conditions, female HepDio3KO mice exhibited elevated hepatic triglyceride and glycogen content. Upon 24-hour fasting, both male and female HepDio3KO mice displayed altered serum TH profiles and impaired energy homeostasis, characterized by increased energy expenditure, suggesting a loss of flexibility in energy output. In the context of WD feeding for 12 weeks, female HepDio3KO mice showed suppression of key energy pathways, including de novo lipogenesis, gluconeogenesis, and ketogenesis. Nonetheless, fatty acid oxidation (FAO) was enhanced, driven by increased TCA cycle activity, as evidenced by elevated citrate synthase activity. This metabolic shift was accompanied by reduced hepatic triglyceride content and white adipose tissue mass. Additionally, improved hepatic health was indicated by a reduction in immune-active Kupffer cell populations and decreased expression of stress-related markers Pdk4 and spliced Xbp1. These beneficial effects, however, were largely absent in male HepDio3KO mice, highlighting a sex-specific phenotype. In conclusion, Dio3 in hepatocytes plays a crucial role in enabling metabolic adaptations during fasting by promoting flexibility in energy expenditure. Conversely, its deletion offers protective benefits in the context of WD-induced MASLD, including enhanced mitochondrial function and reduced hepatic lipid accumulation. While elevated Dio3 expression may be advantageous during short-term energy deprivation, its downregulation under conditions of chronic overnutrition appears to be beneficial. These findings highlight the context-specific and complex role of Dio3 in regulating energy homeostasis.