Functional recovery occurs with sustained sobriety, but the neural mechanisms enabling recovery are only now emerging. Theories about promising mechanisms involve concepts of neuroadaptation, where excessive alcohol consumption results in untoward structural and functional brain changes which are subsequently candidates for reversal with sobriety. Views on functional adaptation in chronic alcoholism have expanded with results from neuroimaging studies. Here, we first describe and define the concept of neuroadaptation according to emerging theories based on the growing literature in aging-related cognitive functioning. Then we describe findings as they apply to chronic alcoholism and factors that could influence compensation, such as functional brain reserve and the integrity of brain structure. Finally, we review brain plasticity based on physiologic mechanisms that could underlie mechanisms of neural compensation. Where possible, we provide operational criteria to define functional and neural compensation.