The transplanted liver can modulate the recipient immune system to induce tolerance after transplantation. This phenomenon was observed nearly five decades ago. Subsequently, the liver’s role in multivisceral transplantation was recognized, as it has a protective role in preventing rejection of simultaneously transplanted solid organs such as kidney and heart. The liver has a unique architecture and is home to many cells involved in immunity and inflammation. After transplantation, these cells migrate from the liver into the recipient. Early studies identified chimerism as an important mechanism by which the liver modulates the human immune system. Recent studies on human T-cell subtypes, cytokine expression, and gene expression in the allograft have expanded our knowledge on the potential mechanisms underlying immunomodulation. In this article, we discuss the privileged state of liver transplantation compared to other solid organ transplantation, the liver allograft’s role in multivisceral transplantation, various cells in the liver involved in immune responses, and the potential mechanisms underlying immunomodulation of host alloresponses.