Tissue-resident and recruited macrophages contribute to both host defense and pathology. Multiple macrophage phenotypes are represented in diseased tissues, but we lack deep understanding of mechanisms controlling diversification. Here, we investigate origins and epigenetic trajectories of hepatic macrophages during diet-induced non-alcoholic steatohepatitis (NASH). The NASH diet induced significant changes in Kupffer cell enhancers and gene expression, resulting in partial loss of Kupffer cell identity, induction of Trem2 and Cd9 expression, and cell death. Kupffer cell loss was compensated by gain of adjacent monocyte-derived macrophages that exhibited convergent epigenomes, transcriptomes, and functions. NASH-induced changes in Kupffer cell enhancers were driven by AP-1 and EGR that reprogrammed LXR functions required for Kupffer cell identity and survival to instead drive a scar-associated macrophage phenotype. These findings reveal mechanisms by which disease-associated environmental signals instruct resident and recruited macrophages to acquire distinct gene expression programs and corresponding functions.