Hepatic encephalopathy (HE) is a reversible syndrome of impaired brain function occurring in patients with advanced liver diseases. The precise pathophysiology of HE is still under discussion; the leading hypothesis focus on the role of neurotoxins, impaired neurotransmission due to metabolic changes in liver failure, changes in brain energy metabolism, systemic inflammatory response and alterations of the blood brain barrier. HE produces a wide spectrum of nonspecific neurological and psychiatric manifestations. Minimal HE is diagnosed by abnormal psychometric tests. Clinically overt HE includes personality changes, alterations in consciousness progressive disorientation in time and space, somnolence, stupor and, finally, coma. Except for clinical studies, no specific tests are required for diagnosis. HE is classified according to the underlying disease, the severity of manifestations, its time course and the existence of precipitating factors. Treatment of overt HE includes supportive therapies, treatment of precipitating factors, lactulose and/or rifaximin. Routine treatment for minimal HE is only recommended for selected patients.