Systemic lipopolysaccharide (LPS) is implicated in increasing mortality in patients with alcoholic hepatitis but the underlying mechanisms are not well characterised. The objective of this study was to characterise neutrophil function, LPS and cytokine concentrations within the splanchnic circulation of alcoholic cirrhotic patients undergoing TIPSS insertion for variceal haemorrhage and correlate this with outcome. 26 patients with alcoholic cirrhosis and variceal haemorrhage were studied prior to and 1-hour after TIPSS insertion. Neutrophil function, LPS and cytokine concentrations were determined in arterial, hepatic venous (HV) and portal venous blood (PV). Significantly higher LPS concentrations and neutrophil reactive oxidant species (ROS) production were observed in PV vs HV blood. Cross-incubation of HV plasma with PV neutrophils resulted in reduced ROS production. Insertion of TIPSS was associated with a significant increase in arterial LPS concentrations and deterioration in neutrophil phagocytosis. Number of organ failures and arterial IL-6 concentrations at presentation were associated with increased mortality. The portal circulation has a distinct immunological milieu characterised by a pathological neutrophil phenotype and an anti-inflammatory cytokine profile associated with heightened LPS levels. TIPSS insertion renders this neutrophil functional defect systemic, associated with an increase in arterial LPS and a susceptibility to sepsis.