Liver failure affects brain function, leading to neurological and psychiatric alterations; such alterations are referred to as hepatic encephalopathy (HE). Early diagnosis of minimal HE reveals an unexpectedly high incidence of mild cognitive impairment and psychomotor slowing in patients with liver cirrhosis - conditions that have serious health, social and economic consequences. The mechanisms responsible for the neurological alterations in HE are beginning to emerge. New therapeutic strategies acting on specific targets in the brain (phosphodiesterase 5, type A GABA receptors, cyclooxygenase and mitogen-activated protein kinase p38) have been shown to restore cognitive and motor function in animal models of chronic HE, and NMDA receptor antagonists have been shown to increase survival in acute liver failure. This article reviews the latest studies aimed at understanding how liver failure affects brain function and potential ways to ameliorate these effects.