Acetaldehyde dehydrogenase 2 (ALDH2) is the key enzyme responsible for metabolism of the alcohol metabolite acetaldehyde in the liver. In addition to conversion of the acetaldehyde molecule, ALDH is also involved in other cellular functions. Recently, many studies have investigated the involvement of ALDH expression in viral hepatitis, alcoholic liver disease (ALD), non-alcoholic fatty liver disease (NAFLD), liver fibrosis, and liver cancer. Notably, ALDH2 expression has been linked with liver cancer risk, as well as pathogenesis and prognosis, and has emerged as a promising therapeutic target. Of note, approximately 8% of the world's population, and approximately 30-40% of the population in East Asia carry an inactive ALDH2 gene. This review summarizes new progress in understanding tissue-specific acetaldehyde metabolism by ALDH2 as well as the association of ALDH2 gene polymorphisms with liver disease and cancer. New research directions emerging in the field are also briefly discussed.