Hepatic encephalopathy (HE) and portal-systemic encephalopathy (PSE) are the terms used interchangeably to describe a complex neuropsychiatric syndrome associated with acute or chronic hepatocellular failure, increased portal systemic shunting of blood, or both. Hepatic encephalopathy complicating acute liver failure is referred to as fulminant hepatic failure (FHF). The clinical manifestations of HE or PSE range from minimal changes in personality and motor activity, to overt deterioration of intellectual function, decreased consciousness and coma, and appear to reflect primarily a variable imbalance between excitatory and inhibitory neurotransmission. Pathogenic mechanisms that may be responsible for HE have been extensively investigated using animal models of HE, or cultures of CNS cells treated with neuroactive substances that have been implicated in HE. Of the many compounds that accumulate in the circulation as a consequence of impaired liver function, ammonia is considered to play an important role in the onset of HE. Acute ammonia neurotoxicity, which may be a cause of seizures in FHF, is excitotoxic in nature, being associated with increased synaptic release of glutamate (Glu), the major excitatory neurotransmitter of the brain, and subsequent overactivation of the ionotropic Glu receptors, mainly the N-methyl-D-aspartate (NMDA) receptors. Hepatic encephalopathy complicating chronic liver failure appears to be associated with a shift in the balance between inhibitory and excitatory neurotransmission towards a net increase of inhibitory neurotransmission, as a consequence of at least two factors. The first is down-regulation of Glu receptors resulting in decreased glutamatergic tone. The down-regulation follows excessive extrasynaptic accumulation of Glu resulting from its impaired re-uptake into nerve endings and astrocytes. Liver failure inactivates the Glu transporter GLT-1 in astrocytes. The second factor is an increase in inhibitory neurotransmission by gamma-aminobutyric acid (GABA) due to (a) increased brain levels of natural benzodiazepines; (b) increased availability of GABA at GABA-A receptors, due to enhanced synaptic release of the amino acid; (c) direct interaction of modestly increased levels of ammonia with the GABA-A-benzodiazepine receptor complex; and (d) ammonia-induced up-regulation of astrocytic peripheral benzodiazepine receptors (PBZR). Brain ammonia is metabolised in astrocytes to glutamine (Gln), an osmolyte, and increased Gln accumulation in these cells may contribute to cytotoxic brain edema, which often complicates FHF. Glutamine efflux from the brain is an event that facilitates plasma-to-brain transport of aromatic amino acids. Tryptophan and tyrosine are direct precursors of the aminergic inhibitory neurotransmitters, serotonin and dopamine, respectively. Changes in serotonin and dopamine and their receptors may contribute to some of the motor manifestations of HE. Finally, oxindole, a recently discovered tryptophan metabolite with strong sedative and hypotensive properties, has been shown to accumulate in cirrhotic patients and animal models of HE.