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Abstract Decellularization of discarded whole livers and their recellularization with patient‐specific induced pluripotent stem cells (iPSCs) to develop a functional organ is a promising approach to increasing the donor pool. The effect of extracellular matrix (ECM) of marginal livers on iPSC‐hepatocyte differentiation and function has not been shown. To test the effect of donor liver ECM age and steatosis, young and old, as well as no, low, and high steatosis livers, are decellularized. All livers are decellularized successfully. High steatosis livers have fat remaining on the ECM after decellularization. Old donor liver ECM induces lower marker expression in early differentiation stages, compared to young liver ECM, while this difference is closed at later stages and do not affect iPSC‐hepatocyte function significantly. High steatosis levels of liver ECM lead to higher albumin mRNA expression and secretion while at later stages of differentiation expression of major cytochrome (CYP) 450 enzymes is highest in low steatosis liver ECM. Both primary human hepatocytes and iPSC‐hepatocytes show an increase in fat metabolism marker expression with increasing steatosis levels most likely induced by excess fat remaining on the ECM. Overall, removal of excess fat from liver ECM may be needed for inducing proper hepatic function after recellularization.