The phenomenon of “intensive care unit (ICU) jaundice” describes cholestasis that occurs in critically ill patients. This ICU jaundice occurs in 20% of critically ill subjects, as a result of non-obstructive intrahepatic disruptions. Despite its common occurrence, not many studies have explored the clinical significance behind this phenomenon. Cholestasis in the critically ill has been associated with a grim prognosis, reflected by serum bilirubin value in many prognostic markers. Not until recently, researchers have shed some light on this phenomenon, not as a mere clinical manifestation of organ dysfunction, but with a protective role in critical illness. This review highlights the physiology and pathophysiology behind cholestatic liver dysfunction in critically ill children, its possible benefit and its harm, as well as factors affecting its severity.