Severe alcohol-associated hepatitis (SAH) is the most aggressive form of alcohol-associated liver disease and is associated with very high short-term mortality. It is characterized by the acute onset of jaundice in the context of ongoing alcohol use, most commonly defined by a Maddrey’s discriminant function ≥32 or a model for end-stage liver disease score ≥20. Despite its increasing global burden and substantial healthcare costs, therapeutic options remain limited, and outcomes are poor. The severity of liver failure, systemic inflammation, infectious complications, and extrahepatic organ dysfunction determines the prognosis in SAH. The pathophysiology of SAH is multifactorial, involving direct hepatotoxicity from alcohol metabolites, oxidative stress, dysregulated immune activation, gut dysbiosis with increased intestinal permeability, impaired hepatic regeneration, and genetic susceptibility. These interrelated mechanisms culminate in an exaggerated inflammatory response driven by macrophage activation and cytokine release, resulting in hepatocellular injury and multi-organ failure. Glucocorticoids remain the guideline-recommended standard of care for selected patients; however, their benefit is limited to modest short-term survival gains, with high rates of non-response and infection. Numerous investigational therapies targeting inflammation, oxidative stress, liver regeneration, bile acid signalling, epigenetic regulation, and the gut-liver axis have been evaluated, with largely disappointing results. Emerging approaches, including interleukin-22 agonists and epigenetic modulators such as larsucosterol, show promise but require validation in well-designed trials. This review synthesizes current evidence on the definition, prognostic assessment, and pathophysiology of SAH, critically appraises existing and emerging therapies, and highlights the need for combination strategies, improved patient stratification, and personalized treatment approaches.