Cirrhosis is associated with decrements in health-related quality of life (HRQOL), but the specific effects of encephalopathy, especially subclinical, on quality of life are incompletely understood. Therefore, the aim of our study was to define the effects of encephalopathy on specific domains of HRQOL in a sample of patients with advanced liver disease. The sample consisted of 160 patients with cirrhosis presenting for liver transplantation evaluation. Health-related quality of life was measured with the Short Form-36 questionnaire. Clinical, demographic, and laboratory data were collected. The presence and degree of encephalopathy was ascertained clinically and by the use of the Reitan trail test. HRQOL scores were compared according to liver disease severity and to the presence and degree of encephalopathy. In addition, scores were compared to US population norms. Data were obtained from 148 patients. Compared to the US general population, the physical and mental component summary scores were lower in patients with cirrhosis. Among patients with cirrhosis, there were no significant differences in the physical and mental component summary scores according to age, gender, ethnicity, and etiology (hepatocellular versus/cholestatic and HCV versus non-HCV). Increasing severity of liver disease (based on the Child-Pugh score), a history of hospitalizations, and a history of ascites were associated with decreased physical component summary scores but not mental component summary scores. Patients with encephalopathy (overt and subclinical) had decreased physical and mental component summary scores compared to patients without encephalopathy. Compared to patients without encephalopathy, those with subclinical encephalopathy had a lower mental component summary score. In conclusion, cirrhosis is associated with a decreased HRQOL, especially at advanced stages. Increased severity of liver disease is associated with decreased physical aspects of quality of life. Overt hepatic encephalopathy negatively affects both physical and mental aspects of quality of life, whereas subclinical encephalopathy affects mainly the mental aspects, independently of liver disease severity.