Over the last four decades, clinical research and experimental studies have established that lipopolysaccharide (LPS)—a component of the outer membrane of gram‐negative bacteria—is a potent hepatotoxic molecule in humans and animals. Alcohol abuse is commonly associated with LPS endotoxemia. This review highlights LPS molecular structures and modes of release from bacteria, plasma LPS concentrations, induction of microbiota dysbiosis, disruption of gut epithelial barrier, and translocation of LPS into the portal circulation impacting the pathophysiology of hepatic cells via the gut‐liver axis. We describe and illustrate the portal vein circulation and its distributaries draining the gastrointestinal tract. We also elaborate on the gut‐liver axis coupled with enterohepatic circulation that represents a bidirectional communication between the gut and liver. The review also updates the data on how circulating LPS is cleared in a coordinated effort between Kupffer cells, hepatocytes, and liver sinusoidal endothelial cells. Significantly, the article reviews and updates the modes/mechanisms of action by which LPS mediates the diverse pathophysiology of Kupffer cells, hepatocytes, sinusoidal endothelial cells, and hepatic stellate cells primarily in association with alcohol consumption. Specifically, we review the intricate linkages between ethanol, microbiota dysbiosis, LPS production, gut‐liver axis, and pathophysiology of various hepatic cells. The maintenance of the gut barrier structural and functional integrity and microbiome homeostasis is essential in mitigating alcoholic liver disease and improving liver health.