Ursodeoxycholic acid is currently the only established drug for the treatment of chronic cholestatic liver diseases. It has cytoprotective, anti-apoptotic, membrane stabilizing, anti-oxidative and immunomodulatory effects. Prolonged administration of ursodeoxycholic acid in patients with primary biliary cirrhosis (PBC) is associated with survival benefit and a delaying of liver transplantation. There is evidence that it might even prevent progression of the histologic stage of PBC. It also has a beneficial effect on primary sclerosing cholangitis, intrahepatic cholestasis of pregnancy, liver disease associated with cystic fibrosis, chronic graft versus host disease, total parenteral nutrition associated cholestasis and various pediatric cholestatic liver diseases. In the present review the current knowledge about the mechanisms of the action and role of ursodeoxycholic acid in the treatment of various liver diseases has been discussed.