A 41 year old woman developed chronic active hepatitis with prominent cholestasis. She was treated with prednisolone over 3 years with symptomatic benefit and improvement in serum biochemistry. However, various steroid-related side effects were encountered and steatorrhoea eventually occurred with very troublesome nocturnal diarrhoea. Therapy with ursodeoxycholic acid 750 mg daily was started. Serum alanine aminotransferase and gamma-glutamyl transferase normalized for the first time since her illness began. Steatorrhoea was abolished. There was good control of symptoms as prednisolone therapy was gradually reduced. However, when prednisolone was completely withdrawn there was a prompt biochemical deterioration. Addition of low-dose azathioprine has maintained normal blood tests over 24 months without return of the original symptoms. There are no side effects of ursodeoxycholic acid in subjects without gallstones and this agent may be effective treatment for cholestatic liver disease.