Hepatic encephalopathy (HE) is a neuropsychiatric syndrome that develops in the context of portosystemic venous shunting, in the presence or absence of intrinsic hepatic disease. HE is clinically characterized by altered sensorium and a spectrum of neuropsychiatric abnormalities. Several hypotheses have been proposed to explain the underlying pathogenic mechanisms of altered brain function associated with advanced hepatic disease and portosystemic shunting. HE may lead to profound coma and death; however, in many cases it is reversible. This article discusses the most recent developments in understanding the pathophysiology of HE and its diagnosis and management.