Hepatic encephalopathy (HE) is a common complication of cirrhosis that requires careful appraisal of the clinical manifestations, evaluation of the underlying neurological disorders, and assessment of liver function and the portal-systemic circulation. This article reviews recent developments in the assessment of HE and discusses the controversy regarding the use of a categorical or a continuous approach in measuring the severity of this condition. New scales facilitate effective monitoring and assessment of episodic HE. Neuropsychological test batteries and neurophysiological tests are of value for evaluating cognitive function in outpatients and can establish the diagnosis of minimal HE, and the severity of low-grade HE. These tools allow better evaluation of the origin of cognitive complaints and help in estimating the risk of accidents. It is now possible to complete the evaluation with measurement of the effects of cognitive impairment on daily living. In difficult cases, imaging of the brain and portal-systemic circulation with magnetic resonance imaging is especially helpful. Based on these studies, neurological signs and symptoms can be attributed to HE in patients with mild liver disease and in those with complex neurological manifestations. The new methods presented are also valuable for investigating the neurological manifestations occurring after liver transplantation.