Guidelines recommend hospitalization for severe immune checkpoint inhibitor (ICI) hepatitis. We compared patient outcomes in the inpatient versus outpatient settings. We conducted a multicenter, retrospective cohort study of 294 ICI-treated patients who developed grade 3-4 ICI hepatitis. The primary outcome was time to alanine aminotransferase (ALT) normalization (≤40); secondary outcomes included time to ALT ≤100 U/L and time to death. To account for confounding by indication, inverse probability of treatment weighting was applied to perform Cox regression. A sensitivity analysis was performed excluding patients with grade 4 hepatitis. One hundred and sixty-six patients (56.5%) were hospitalized for a median of 6 (interquartile range, 3-11) days. On inverse probability of treatment weighting Cox regression, hospitalization was not associated with time to ALT normalization (hazard ratio [HR], 1.11; 95% confidence interval [CI], 0.86-1.43; P= .436) or time to ALT ≤100 U/L (HR, 1.11; 95% CI, 0.86-1.43; P=.420). In the sensitivity analysis limited to patients with grade 3 hepatitis, hospitalization was also not associated with time to ALT normalization (HR, 1.11; 95% CI, 0.83-1.50; P= .474) or time to ALT ≤100 U/L (HR, 1.19; 95% CI, 0.90-1.58; P= .225). In a subgroup analysis of 152 patients with melanoma, hospitalization was not associated with reduced risk of all-cause death (HR, 0.93; 95% CI, 0.53-1.64; P= .798). Notably, despite their Common Terminology Criteria for Adverse Events classification of high-grade hepatitis, 94% of patients had "mild" liver injury based on International Drug-Induced Liver Injury Criteria. Hospitalization of patients with high-grade ICI hepatitis was not associated with faster hepatitis resolution and did not affect mortality. Routine hospitalization may not be necessary in all patients with high-grade ICI hepatitis and Common Terminology Criteria for Adverse Events criteria may overestimate severity of liver injury.