There is evidence that postoperative cognitive dysfunction (POCD) is a significant problem after major surgery, but the pathophysiology has not been fully elucidated. The interpretation of available studies is difficult due to differences in neuropsychological test batteries as well as the lack of appropriate controls. Furthermore, there are no internationally accepted criteria for defining POCD. This article aims to provide an update of current knowledge of the pathogenesis of POCD with a focus on perioperative pathophysiology and possible benefits achieved from an enhanced postoperative recovery using a fast-track methodology. It is concluded that the pathogenesis of POCD is multifactorial and future studies should focus on evaluating the role of postoperative sleep disturbances, inflammatory stress responses, pain and environmental factors. Potential prophylactic intervention may include minimal invasive surgery, multi-modal non-opioid pain management and pharmacological manipulation of the inflammatory response and sleep architecture.