Acute-on-chronic liver failure (ACLF) is a distinct entity that differs from acute liver failure and decompensated cirrhosis in timing, presence of treatable acute precipitant, and course of disease, with a potential for self-recovery. The core concept is acute deterioration of existing liver function in a patient of chronic liver disease with or without cirrhosis in response to an acute insult. The insult should be a hepatic one and presentation in the form of liver failure (jaundice, encephalopathy, coagulopathy, ascites) with or without extrahepatic organ failure in a defined time frame. ACLF is characterized by a state of deregulated inflammation. Initial cytokine burst presenting as SIRS, progression to CARS and associated immunoparalysis leads to sepsis and multi-organ failure. Early identification of the acute insult and mitigation of the same, use of nucleoside analogue in HBV-ACLF, steroid in severe alcoholic hepatitis, steroid in severe autoimmune hepatitis and/or bridging therapy lead to recovery, with a 90-day transplant-free survival rate of up to 50 %. First-week presentation is crucial concerning SIRS/sepsis, development, multiorgan failure and consideration of transplant. A protocol-based multi-disciplinary approach including critical care hepatology, early liver transplant before multi-organ involvement, or priority for organ allocation may improve the outcome. Presentation with extrahepatic organ involvement or inclusion of sepsis as an acute insult in definition restricts the therapy, i.e., liver transplant or bridging therapy, and needs serious consideration. Augmentation of regeneration, cell-based therapy, immunotherapy, and gut microbiota modulation are the emerging areas and need further research.