Hepatic encephalopathy (HE) is a common complication of cirrhosis that is associated with brain atrophy and may participate in impaired cognitive function after liver transplantation. This study analyzes the relationship of HE with cognitive function and brain volume after transplantation. A total of 52 consecutive patients with cirrhosis (24 alcohol abuse, 24 prior HE, 14 diabetes mellitus) completed a neuropsychological assessment before liver transplantation and again, 6 to 12 months after transplantation. In 24 patients who underwent the posttransplant assessment, magnetic resonance imaging was performed in addition, with measurement of brain volume and relative concentration of N-acetylaspartate (NAA) and creatine/phosphocreatine (Cr), a neuronal marker, by magnetic resonance spectroscopy. Neuropsychological assessment prior to transplantation identified minimal HE in 28 patients. All cognitive indexes improved after liver transplantation, but 7 patients (13%) showed persistent mild cognitive impairment. Global cognitive function after transplantation was poorer in patients with the following variables before liver transplantation: alcohol etiology, diabetes mellitus, and HE. Brain volume after transplantation was smaller in patients with prior HE. Brain volume correlated to NAA/Cr values (r = 0.498, P = 0.013) and poor motor function (r = 0.41, P = 0.049). In conclusion, the association of HE with cognitive function and brain volume suggests that having experienced HE before liver transplantation impairs the posttransplantation neurological outcome. Liver Transpl 17:38–46, 2011. © 2011 AASLD.