Hepatic encephalopathy (HE) is a frequent and serious complication of both chronic liver disease and acute liver failure. HE manifests as a wide spectrum of neuropsychiatric abnormalities, from subclinical changes (mild cognitive impairment) to marked disorientation, confusion and coma. The clinical and economic burden of HE is considerable, and it contributes greatly to impaired quality of life, morbidity and mortality. This review will critically discuss the latest classification of HE, as well as the pathogenesis and pathophysiological pathways underlying the neurological decline in patients with end-stage liver disease. In addition, management strategies, diagnostic approaches, currently available therapeutic options and novel treatment strategies are discussed.