We present a class of time-reversal-symmetric fractional topological liquid states in two dimensions that support fractionalized excitations. These are incompressible liquids made of electrons, for which the charge Hall conductance vanishes and the spin Hall conductance needs not be quantized. We then analyze the stability of edge states in these two-dimensional topological fluids against localization by disorder. We find a stability criterion for whether or not there exists a Kramers pair of edge modes that is robust against disorder. We also introduce an interacting electronic two-dimensional lattice model based on partially filled flattened bands of a topological band insulator, which we study using numerical exact diagonalization. We show evidence for instances of the fractional topological liquid phase as well as for a time-reversal symmetry broken phase with a quantized (charge) Hall conductance in the phase diagram for this model.