Ursodeoxycholic acid (ursodiol) is a naturally occurring bile acid that constitutes about 1-2% of the bile acids in human bile. Although well known for more than 20 years in Japan as a treatment for biliary distress and dyspepsia, ursodiol has been tested as a gallstone-dissolving agent only since 1976. Successful dissolution occurs in 30-80% of subjects with radiolucent gallstones, depending on the size and number of the stones. Calcified or pigment stones do not respond to this treatment. The current theory of the pathogenesis of gallstones is that lithogenic bile, which is supersaturated with cholesterol, is secreted by the liver and is not produced in the gallbladder. Thus, although stones form in the gallbladder, defective hepatic cholesterol and bile acid metabolism are responsible for the abnormal bile. Gallstone-prone individuals show increased hepatocholesterol formation and reduced bile acid synthesis. As the micellar solubility limit in bile is exceeded, cholesterol microcrystals precipitate. Four factors account for ursodiol's effectiveness in gallstone dissolution: (a) biliary cholesterol secretion is diminished markedly during therapy; (b) hepatic bile acid synthesis is not inhibited by ursodiol; (c) the 7 beta-hydroxy group of ursodiol resists bacterial dehydroxylation, which lowers the amount of lithocholic acid formed and the cholestasis and liver damage it can cause; and (d) ursodiol is virtually free of side effects and toxicity; less than 1% of subjects experience transient diarrhea, which does not require discontinuation of treatment, and liver function tests remain normal. In about 50% of subjects, stones may recur within 84 months, and can be retreated with ursodiol.