The advent of next-generation sequencing has enabled in-depth analysis to study the composition and function of the gut microbiota in a culture-independent manner. Consequently, this has led to rapid interest in understanding the pathogenesis and progression of chronic liver disease in relation to perturbations of the gut microbiota. Animal models and human studies have demonstrated its crucial role in contributing to disease mechanisms in alcoholic and non-alcoholic liver disease and more recently in primary sclerosing cholangitis. There is increasing evidence to suggest that the gut microbiota and its components influence the development and modulation of chronic liver damage through direct communication via the portal system, metabolite production, alterations in gut barrier integrity, liver/gut immune axis and bile acid metabolism. The impact of microbiota-directed therapies for liver disease is still in its infancy. Better understanding of its role in disease mechanisms will lead to a more targeted approach in modulation of gut microbiota to influence both progression and complications of liver disease. This review discusses the current evidence for the gut microbiota-liver axis and its role in the development, progression and treatment of liver disease.