The mechanisms of sodium and water retention in cirrhotic patients are incompletely understood. A recent theory, the peripheral vasodilation hypothesis, postulates that the initiating phenomenon is a permanent state of arterial vasodilation causing effective arterial underfilling, which triggers a host of natriuretic factors. The transjugular intrahepatic portosystemic shunt (TIPS) has created intense debate regarding the management of refractory ascites and at the same time has helped to clarify some of the pathophysiologic aspects of the sodium homeostasis in cirrhotic patients. This paper reviews the current status of knowledge and theories regarding TIPS and ascites, as well as the most recent literature in spontaneous bacterial peritonitis and portosystemic encephalopathy.