In this review first we evaluate evidence on the role of the neurobiological alterations induced by chronic ethanol consumption in the development of ethanol tolerance, dependence and withdrawal. Secondly, we describe the neuropathological consequences of chronic ethanol on cognitive functions and on brain structures. Chronic alcohol consumption can induce alterations in the function and morphology of most if not all brain systems and structures. While tolerance mechanisms are unlikely to contribute to the neuroadaptive changes associated with ethanol dependence, it is otherwise clear that repeated high, intoxicating doses of ethanol trigger those neuroadaptive processes that lead to dependence and contribute to the manifestation of the abstinence syndrome upon withdrawal. An unbalance between inhibitory and excitatory neurotransmission is the most prominent neuroadaptive process induced by chronic ethanol consumption. Due to the diffuse glutamatergic innervation to all brain structures, the neuroadaptive alterations in excitatory neurotransmission can affect the function of most if not all of neurotransmitter systems. The expression of the withdrawal syndrome is the major causal factor for the onset and development of the neuropathological alterations. This suggests a link between the neuroadaptive mechanisms underlying the development of ethanol dependence and those underlying the functional and structural alterations induced by chronic ethanol. In animals and humans, specific alterations occur in the function and morphology of the diencephalon, medial temporal lobe structures, basal forebrain, frontal cortex and cerebellum, while other subcortical structures, such as the caudate nucleus, seem to be relatively spared. The neuropathological alterations in the function of mesencephalic and cortical structures are correlated with impairments in cognitive processes. In the brain of alcoholics, the prefrontal cortex and its subterritories seem particularly vulnerable to chronic ethanol, whether Korsakoff's syndrome is present or not. Due to the role of these cortical structures in cognitive functions and in the control of motivated behavior, functional alterations in this brain area may play an important role in the onset and development of alcoholism.