Ursodeoxycholic acid (UDCA) improves liver enzymes and in many instances liver histology in cholestatic liver diseases such as primary biliary cirrhosis and primary sclerosing cholangitis. Besides classic cholestatic diseases, UDCA also improves liver biochemistry in alcoholic liver disease and in chronic viral hepatitis C. The main target of UDCA treatment, however, is cholestasis, and consequently the mechanisms responsible for the beneficial effects in these diseases are of interest, and are discussed in detail in this article.