Hepatic encephalopathy (HE) is normally diagnosed by neuropsychological (NP) tests, which are not very specific and do not reveal the underlying pathology. Magnetic resonance imaging (MRI) and spectroscopy (MRS) of the brain offer alternative and possibly more specific markers for HE. These methods were applied in conjunction with NP testing in order to determine their usefulness in the identification of HE and to understand the pathogenesis of HE more clearly. MR imaging and spectroscopy examinations, in addition to a battery of 15 NP tests, were administered to investigate 31 patients awaiting liver transplantation and 23 healthy controls. MR image intensities from the globus pallidus region were calculated and normalized to those of the thalamus. Absolute concentrations and ratios with respect to creatine (Cr) of several metabolites were computed from MR spectra. The MR data were correlated with the results of NP tests. The patients showed impairment in NP tests of attention and visuospatial and verbal fluency. In T1-weighted MRI, the relative intensity of the globus pallidus with respect to that of the thalamus region was significantly elevated in patients and correlated(negatively) with three NP tests (Hooper, FAS, and Trails B). The absolute concentrations of myo-inositol (mI) and choline (Ch) were significantly reduced in three brain regions. In addition, the absolute concentrations of glutamine (Gln) and combined glutamate and glutamine (Glx) were increased in all three locations, with Gln increase being significant in all areas while that of Glx only in the occipital white matter. In summary, this study partially confirms a hypothesized mechanism of HE pathogenesis, an increased synthesis of glutamine by brain glutamate in astrocytes due to excessive blood ammonia, followed by a compensatory loss of myo-inositol to maintain astrocyte volume homeostasis. It also indicates that the hyperintensity observed in globus pallidus could be used as complementary to the NP test scores in evaluating the mental health of HE patients.