Background Among patients with cirrhosis, candidate selection and timing of liver transplantation (LT) remain problematic. Acute‐on‐chronic liver failure (ACLF) is a severe complication of cirrhosis with excessive short‐term mortality rates under conservative therapeutic measures. The role of LT in the management of ACLF is uncertain. Objective To assess the impact of ACLF on post‐LT survival and long‐term graft function, morbidity and quality of life (QoL). Methods We retrospectively analysed all cirrhosis patients undergoing LT at our institution between 01/2009 and 12/2014. Median follow‐up was 8.7 years. Long‐term LT survivors were interviewed with established QoL questionnaires. Results Of 250 LT recipients, 98 fulfilled the EASL diagnostic ACLF criteria before LT (‘ACLF‐LT’). ACLF associated with reduced post‐LT survival (HR for 6‐month survival compared to non‐ACLF‐LT: 0.18; HR for 10‐year‐survival: 0.47; both P < .001) depending on ACLF severity before LT, and mainly inferred by infections both in the early and late phases after LT. In ACLF patients, CLIFc‐OFs was superior to MELD score in predicting post‐LT mortality. Long‐term follow‐up revealed comparable graft functions and comorbidity burden in ACLF‐LT and non‐ACLF‐LT survivors. ACLF‐LT patients reported significantly impaired health and QoL, particularly with regards to anxiety/depression and physical and psychological health (all P < .05). LabMELD score, presence of ACLF at LT and duration of post‐LT intensive care associated with poor long‐term QoL. Conclusion ACLF predicts impaired post‐LT survival. While long‐term graft function and extrahepatic comorbidities are comparable in ACLF and non‐ACLF LT survivors, the strikingly low QoL in many ACLF‐LT recipients warrants consideration during follow‐up patient care.