Hepatic encephalopathy (HE) is a neuropsychiatric syndrome complicating acute and chronic liver failure and characterized by a wide range of manifestations, in absence of other brain disease. HE is very frequent in course of cirrhosis and even mild forms involve a great additional burden on patients, their families and health-care resources. Its onset affects subsequent survival of patients. Historically, pathophysiology of HE was connected to several substances (mostly ammonia) produced in the gut and normally metabolized by the liver, but more recently other factors such as inflammation, bacterial translocation and oxidative stress have shown a crucial role. Symptoms are often overt (confusion, asterixis, disorientation, ataxia or coma) but can also be subtle (sleep disturbances, cognitive impairment, mood alterations, impairment of executive decision-making, and psychomotor speed – Minimal HE); the West Haven Criteria are most often used to grade Overt HE (OHE), with grade ranging from 0 to 4 (4 corresponding to coma). Since both Minimal HE and grade 1 HE cannot be diagnosed by clinical examination and need for specific tests, it results practical to combine these entities and name them "Covert" HE (CHE) to aid clinical use. Diagnosis is based on evidence of neurological impairment in presence of liver cirrhosis, only after the exclusion of other brain diseases. Measurement of serum ammonia and electroencephalography are little specific, while brain magnetic resonance and search for portosystemic shunts are important in complex cases. Diagnosis of OHE is often just clinical, while that of CHE requires dedicated psychometric and neurophysiological tests. Although these tests are difficult to be performed in the clinical practice, detection and treatment of CHE are cost-effective and important; indeed, CHE affects patients’ quality of life, socioeconomic status and driving skills, and increases the risk for falls, car accidents, development of OHE, and death. Management of HE includes early diagnosis and prompt treatment of precipitating factors (infection, gastrointestinal bleeding, electrolyte disturbances, dehydration, hypotension, use of benzodiazepines, psychoactive drugs, and/or alcohol). Current treatment is based principally on reducing intestinal ammonia with nonabsorbable disaccharides (lactulose or lactitol); rifaximin, used solely or in addition, is also becoming a first-line treatment.