Hepatic encephalopathy (HE) may develop within the course of acute or chronic liver failure and is characterized by a complex of psychomotor symptoms. In addition, HE can be induced by portocaval shunting even in the absence of any apparent liver disease. HE is caused by substances, which are either reabsorbed from the gut or are a product of the body metabolism. Normally, these substances are effectively eliminated during their first passage through the liver. However, a decreasing number of functional hepatocytes or the presence of portocaval collaterals in liver disease may significantly impair hepatic detoxification. Ammonia seems to take a central position in the pathogenesis of HE, although the exact cerebral effects of this metabolite are still not known in detail. The actual pathogenetic hypotheses are subject of this review. Depending on the underlying liver disease, HE is divided into an acute and a chronic form. Chronic HE may be present as a persistent or an episodic form, the latter being usually induced by defined precipitating factors, such as diet failures, infection and gastrointestinal-bleeding. With regard to the psychomotor symptoms and the coma depth, the clinical picture is classified into five grades (West Haven criteria). Diagnosis is made by clinical examination of the mental status after relevant differential diagnoses have been excluded. The only causal therapeutic option in the presence of acute or chronic liver failure is liver transplantation. Therefore, the indication for transplantation has to be evaluated in all forms of HE. Symptomatic treatment has three principal aims: (1) stabilization of circulation, oxygen supply, blood sugar and nutrition; (2) identification of the precipitating factor and its removal; (3) reduction of ammonia and other potential toxins in the circulation. In the case of acute HE, these therapeutic aims are complemented by an effective prophylaxis or therapy of brain edema.