The pharmacokinetics, metabolism, as well as the pharmacodynamic actions of ursodeoxycholic acid are reviewed and related to its physicochemical properties. Ursodeoxycholic acid is absorbed incompletely because of its low aqueous solubility. After absorption, it is conjugated with glycine or taurine and circulates with the endogenous bile acids. At usual doses (8-10 mg/kg/day), the pool of ursodeoxycholyl conjugates constitutes 30-60% of circulating bile acids. Ursodeoxycholic acid is metabolized by intestinal bacteriae to lithocholic acid which does not accumulate in the circulating bile acids because of efficient hepatic sulfation. Administration of ursodeoxycholic acid causes decreased cholesterol absorption, increased bile acid biosynthesis, and decreased biliary cholesterol secretion. Ursodeoxycholic acid is a choleretic agent, as all bile acids, but differs from other dihydroxy-bile acids in being non-cytotoxic because it has less affinity for membranes, and when present at micellar concentrations does not solubilize membranes. Chronic administration of ursodeoxycholic acid appears to increase canalicular transport.