Hepatic encephalopathy (HE) is a common complication of liver failure that is associated with poor prognosis. However, the prognosis is not uniform and depends on the underlying liver disease. Acute liver failure is an uncommon cause of HE that carries bad prognosis but is potentially reversible. There are several prognostic systems that have been specifically developed for selecting patients for liver transplantation. In patients with cirrhosis the prognosis of the episode of HE is usually dictated by the underlying precipitating factor. Acute-on-chronic liver failure is the most severe form of decompensation of cirrhosis, the prognosis depends on the number of associated organ failures. Patients with cirrhosis that have experienced an episode of HE should be considered candidates for liver transplant. The selection depends on the underlying liver function assessed by the Model for End-stage Liver Disease (MELD) index. There is a subgroup that exhibits low MELD and recurrent HE, usually due to the coexistence of large portosystemic shunts. The recurrence of HE is more common in patients that develop progressive deterioration of liver function and hyponatremia. The bouts of HE may cause sequels that have been shown to persist after liver transplant.