Increased GABAergic tone in the substantia nigra reticulum (SNr) causes bradykinesia in hepatic encephalopathy (HE), but its mechanisms need to be further elucidated. In the present study, FosCreERT2 (TRAP2) strategy and designer receptors exclusively activated by designer drugs (DREADDs) strategy revealed that MHE and ammonia activated SNr Gad2-expressing GABA population and mitochondria in such population were sensitive to ammonia imbalance. We have shown that the chemogenetic inhibition of this population, or targeted overexpression of mitochondrial Ucp2 in such population, or systemic application of a mitochondrial-targeting antioxidant drug MitoQ, could ameliorate HE effectively, by relieving neuronal oxidative stress and improving mitochondrial dysfunction. Our results identify activation of Gad2 neurons and oxidative stress-induced mitochondrial abnormalities in SNr as critical determinants in HE and demonstrate the potential for targeting this pathway in HE.