Hepatic encephalopathy (HE) incorporates a spectrum of neuropsychiatric abnormalities seen in patients with liver dysfunction with a potential for full reversibility. Distinct syndromes are identified in acute liver failure and cirrhosis. Rapid deterioration in consciousness level and increased intracranial pressure that may result in brain herniation and death are a feature of acute liver failure whereas manifestations of HE in cirrhosis include psychomotor dysfunction, impaired memory, increased reaction time, sensory abnormalities, poor concentration and in severe forms, coma. For over a 100 years ammonia has been considered central to its pathogenesis. In the brain, the astrocyte is the main site for ammonia detoxification, during the conversion of glutamate to glutamine. An increased ammonia level raises the amount of glutamine within astrocytes, causing an osmotic imbalance resulting in cell swelling and ultimately brain oedema. The present review focuses upon the molecular mechanisms involved in the pathogenesis of HE. Therapy of HE is directed primarily at reducing ammonia generation and increasing its detoxification.