Hepatic encephalopathy in a hospitalized cirrhotic patient is associated with a high mortality rate and its presence adds further to the mortality of patients with acute-on-chronic liver failure (ACLF). The exact pathophysiological mechanisms of HE in this group of patients are unclear but hyperammonemia, systemic inflammation (including sepsis, bacterial translocation, and insulin resistance) and oxidative stress, modulated by glutaminase gene alteration, remain as key factors. Moreover, alcohol misuse, hyponatremia, renal insufficiency, and microbiota are actively explored. HE diagnosis requires exclusion of other causes of neurological, metabolic and psychiatric dysfunction. Hospitalization in the ICU should be considered in every patient with overt HE, but particularly if this is associated with ACLF. Precipitating factors should be identified and treated as required. Evidence-based specific management options are limited to bowel cleansing and non-absorbable antibiotics. Ammonia lowering drugs, such as glycerol phenylbutyrate and ornithine phenylacetate show promise but are still in clinical trials. Albumin dialysis may be useful in refractory cases. Antibiotics, prebiotics, and treatment of diabetes reduce systemic inflammation. Where possible and not contraindicated, large portal-systemic shunts may be embolized but liver transplantation is the most definitive step in the management of HE in this setting. HE in patients with ACLF appears to be clinically and pathophysiologically distinct from that of acute decompensation and requires further studies and characterization.