Ursodeoxycholic acid (UDCA), previously used for cholesterol gallstone dissolution, is currently considered the first choice therapy for many forms of cholestatic syndromes. Many mechanisms and sites of action have been proposed for UDCA, but definitive data are still missing regarding the key points of its efficacy and optimal dosage in order to achieve a sustained clinical effect. Among the suggested mechanisms of action of UDCA, changes in bile acid pool composition, hepatocyte membrane protection, immunomodulatory effects and bicarbonate-rich hypercholeresis have been extensively studied. However, recent evidence indicate that UDCA is a potent intracellular signalling agent that counterbalances impaired biliary secretion, inhibits hepatocyte apoptosis and protects injured cholangiocytes against toxic effects of bile acids. It is clear that the relative contribution of these mechanisms to the anticholestatic action of UDCA depends on the type and stage of the liver injury. Available clinical evidence suggest that UDCA treatment has to be initiated as early as possible and that higher doses could be more efficacious in inducing and maintaining clinical remission of cholestatic diseases. The future availability of UDCA derivatives will possibly enhance the chances to effectively treat chronic cholestatic diseases.