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This is the third, substantially revised edition of this important monograph. The book is concerned with Kac-Moody algebras, a particular class of infinite-dimensional Lie algebras, and their representations. It is based on courses given over a number of years at MIT and in Paris, and is sufficiently self-contained and detailed to be used for graduate courses. Each chapter begins with a motivating discussion and ends with a collection of exercises, with hints to the more challenging problems.