Prednisone alone or in combination with azathioprine is the treatment of choice for severe type 1 autoimmune hepatitis. The combination regimen is preferred, especially in the elderly, because of a lower incidence of corticosteroid-related complications. Only patients with sustained severe laboratory abnormalities, bridging necrosis or multilobular necrosis on histological assessment, and/or incapacitating symptoms, have absolute indications for treatment based on controlled clinical trials. The institution of therapy must be individualised in other patients, based mainly on symptoms and disease behaviour. Serum aspartate aminotransferase and gamma-globulin levels are the most useful indices to monitor during therapy. Liver tissue examination is the best method of evaluating completeness of response. Most patients enter remission, but relapse occurs in 50 to 86% after drug withdrawal. Maintenance therapy with low dosages of prednisone or azathioprine can be used long term in patients who have relapsed repeatedly. Inability to achieve remission after 3 years (incomplete response), deterioration during therapy (treatment failure) and drug toxicity are unsatisfactory responses that warrant alternative strategies. Liver transplantation is effective in managing decompensated disease, but recurrence of autoimmune hepatitis after transplantation is possible. Tacrolimus and budesonide are promising new drugs.