Forty two patients of chronic liver disease (CLD) were studied to evaluate the diagnostic utility of brainstem auditory evoked potentials (BAEP) and visual evoked potentials (VEP) with respect to development of hepatic encephalopathy (HE). The evoked potential (EP) evaluation was coincided with electroencephalography (EEG). A sequential analysis of electrophysiologic modifications occurring in response to dietary protein challenge or large-volume paracentesis was planned by carrying out the study in two phases. The first phase patients did not undergo provocation procedures. They were divided into group 1 (28 patients) and group 2 (14 patients) on the basis of respective absence or presence of neuropsychologically recognizable HE. Phase II included 13 patients of which 10 were given high-protein diet and 3 underwent ascitic tap. A control group of matched healthy individuals was also studied with the 3 step paradigm of electophysiologic assessment comprising VEP, BAEP and EEG. The EEG abnormalities were detected in 10.7 percent of non-HE and 64.2 percent of HE patient groups, without a statistically significant difference between the P100 mean latency scores of both these groups. Evaluation of BAEP revealed abnormalities in 17.8 percent patients of group 1 and 42.8 percent of group 2 enrolled under phase I, and 30.76 percent patients of phase II. The chief abnormality in the non-HE group was significantly higher mean I-V interpeak latency (IPL) scores compared to controls. All the 3 interpeak latencies I-III, III-V and I-V were abnormally prolonged in the HE patients group. There was no significant prolongation of various mean latencies after the provocation procedures in phase II patients, despite an appreciable upward trend in the BAEP interpeak latencies. The mechanisms underlying EP abnormalities in CLD are discussed. It is concluded that BAEP is a useful neurophysiologic device to follow up patients with CLD at risk of lapsing into overt HE.