A 43-year-old man presented with weakness, pruritus, skin rash and jaundice 2 weeks after treatment for onychomycosis with terbinafine (Lamisil) was started. Liver function tests showed combined hepatocellular and cholestatic injury. Ultrasound examination, computerized tomography and ERCP excluded extrahepatic obstruction. Serology was negative for HBV, HCV, HAV, CMV, and EBV. Liver biopsy was consistent with drug-induced cholestatic injury. Since the clinical picture did not improve when terbinafine was stopped, corticosteroids were started and resulted in complete clinical and laboratory recovery; liver function tests were normal 8 months after corticosteroids were discontinued.