Ammonia is thought to be central to the pathogenesis of hepatic encephalopathy (HE), but its prognostic role in patients with cirrhosis and acute decompensation is unknown. The aims of this study were to determine the relationship between ammonia levels and severity of HE and its association with organ dysfunction and short‐term mortality. We identified 498 patients from two institutions as part of prospective observational studies in patients with cirrhosis. Plasma ammonia levels were measured on admission and Chronic Liver Failure‐Sequential Organ Failure Assessment criteria were used to determine the presence of organ failures. The 28‐day patient survival was determined. Receiver operating characteristic analysis was used to identify the cutoff points for ammonia values, and multivariable analysis was performed using the Cox proportional hazard regression model. The 28‐day mortality was 43.4%. Plasma ammonia correlated with severity of HE (P < 0.001), was significantly higher in nonsurvivors (93 [73‐121] versus 67 [55‐89] µmol/L, P < 0.001), and was an independent predictor of 28‐day mortality (hazard ratio, 1.009, P < 0.001). An ammonia level of 79.5 µmol/L had sensitivity of 68.1% and specificity of 67.4% for predicting 28‐day mortality. An ammonia level of ≥79.5 µmol/L was associated with a higher frequency of organ failures (liver [P = 0.004], coagulation [P < 0.001], kidney [P = 0.004], and respiratory [P < 0.001]). Lack of improvement in baseline ammonia at day 5 was associated with high mortality (70.6%). Conclusion: Ammonia level correlates with not only the severity of HE but also the failure of other organs and is an independent risk factor for mortality; lack of improvement in ammonia level is associated with high risk of death, making it an important biomarker and a therapeutic target.