The development of alcoholic liver disease (ALD) is a complex process involving both the parenchymal and non-parenchymal cells in the liver. The impact of ethanol on hepatocytes can be characterized as a condition of organelle stress with multifactorial changes in hepatocellular function accumulating during ethanol exposure. These changes include oxidative stress, mitochondrial dysfunction, decreased methylation capacity, endoplasmic reticulum stress, impaired vesicular trafficking and altered proteasome function. Injury to hepatocytes is attributed, in part, to ethanol metabolism by the hepatocytes. Changes in the structural integrity of hepatic sinusoidal endothelial cells, as well as enhanced inflammation in the liver during ethanol exposure are also important contributors to injury. Activation of hepatic stellate cells initiates the deposition of extracellular matrix proteins characteristic of fibrosis. Kupffer cells, the resident macrophages in the liver, are particularly critical to the onset of ethanol-induced liver injury. Chronic ethanol exposure sensitizes Kupffer cells to activation by lipopolysaccharides via toll-like receptor 4. This sensitization enhances the production of inflammatory mediators, such as tumor necrosis factor-α and reactive oxygen species that contribute to hepatocyte dysfunction, necrosis and apoptosis of hepatocytes and the generation of extracellular matrix proteins leading to fibrosis. In this review we provide an overview of the complex interactions between parenchymal and non-parenchymal cells in the liver during the progression of ethanol-induced liver injury.