Hereditary hemochromatosis (HH) is caused by chronic hyperabsorption of dietary iron. Progressive accumulation of excess iron within tissue parenchymal cells may lead to severe organ damage. The most prevalent type of HH is linked to mutations in the HFE gene, encoding an atypical major histocompatibility complex class I molecule. Shortly after its discovery in 1996, the hemochromatosis protein HFE was shown to physically interact with transferrin receptor 1 (TfR1) and impair the uptake of transferrin-bound iron in cells. However, these findings provided no clue why HFE mutations associate with systemic iron overload. It was later established that all forms of HH result from misregulation of hepcidin expression. This liver-derived circulating peptide hormone controls iron efflux from duodenal enterocytes and reticuloendothelial macrophages by promoting the degradation of the iron exporter ferroportin. Recent studies with animal models of HH uncover a crucial role of HFE as a hepatocyte iron sensor and upstream regulator of hepcidin. Thus, hepatocyte HFE is indispensable for signaling to hepcidin, presumably as a constituent of a larger iron-sensing complex. A working model postulates that the signaling activity of HFE is silenced when the protein is bound to TfR1. An increase in the iron saturation of plasma transferrin leads to displacement of TfR1 from HFE and assembly of the putative iron-sensing complex. In this way, iron uptake by the hepatocyte is translated into upregulation of hepcidin, reinforcing the concept that the liver is the major regulatory site for systemic iron homeostasis, and not merely an iron storage depot.