In contrast to all other vascularized organ allografts, chronic rejection (CR) of the liver is potentially reversible. We therefore studied demographic, perioperative, biochemical, and histologic features associated with reversibility or progression to graft failure. Using very stringent clinical and histological criteria, we identified a subgroup of 23 of 916 patients receiving primary liver allografts with CR from the Liver Transplantation Database. Of these, 13 experienced graft failure as a result of CR, and 10 patients recovered to normal histology or liver injury test results. Male-to-female sex mismatch (p = 0.07), younger recipient age (p = 0.09), younger donor age (p = 0.06), white-to-white race match (p = 0.09), primary diagnosis of biliary atresia (p = 0.02), and cold ischemia time of more than 12 hours (p = 0.02) were associated with graft failure. Patients who eventually recovered from CR were more likely to have acute rejection within the first 2 weeks (70% vs 23%; p = 0.04), had a higher number of acute rejection episodes (p = 0.08), and were more likely to have been treated with OKT3 (90% vs 46%, p = 0.07). Although overlap existed in the histopathologic findings between the patients whose grafts failed and those who recovered, those patients who developed bile duct loss in more than 50% of the portal tracts (p < 0.01), severe (bridging) perivenular fibrosis (p = 0.05), and the presence of foam cell clusters (p = 0.06) were more likely to require retransplantation. In contrast to other solid organ allografts, CR of the liver is not an irreversible process. These findings can be used to understand the evolution of CR and to design a biologically correct and clinically relevant staging system.