This paper is about toroidal Lie algebras, certain intersection matrix Lie algebras defined by Slodowy, and their relationship to one another and to certain Lie algebra analogues of Steinberg groups. The main result of the paper is the identification of the intersection matrix algebras arising from multiply-affinized Cartan matrices of types A, D and E with certain Steinberg Lie algebras and toroidal Lie algebras (Propositions 5.9 and 5.10). A major part of the paper studies and classifies Lie algebras graded by finite root systems. These become the princi- pal tool in our analysis of intersection matrix algebras. Each Lie algebra graded by a simply-laced finite root system of rank > 2 has attached to it an algebra which, according to the type and rank, is either commutative and associative, only associative, or alternative. All these possibilities occur in our description of inter- section matrix algebras. Let R be any associative algebra with identity, not necessarily finite dimen- sional, over a field k of characteristic 0. For each positive integer n the associative algebra M,(R) of n “ n matrices with coefficients in R forms a Lie algebra over k under the commutator product. We denote this Lie algebra by ol,(R). Let Eis be the (i, j) matrix unit of M.(R) and assume that n > 2. The subalgebra e.(R) of OI.(R) generated by the elements rEis, r ~ R, i 4= j, is an ideal of 91,(R) and is perfect, i.e. it is its own derived algebra. Now any perfect Lie algebra O has a universal central extension, also perfect, called a universal covering algebra (u.c.a.) of O [Ga], so in particular, e.(R) has a u.c.a, that we will denote by ~t,(R). We define 112,.(R) by the exact sequence (0.1) 0 ~ f2,,(R) ~ ~t.(R) ~ e,(R) ~ 0 * Dedicated to our teacher Maria J. Wonenburger ** Both authors gratefully acknowledge the support of the Natural Sciences and Engineering Research Council of Canada