The characteristics of neutral-beam-heated ASDEX discharges exhibiting either low (L)- or high (H)-confinement are described. H-mode discharges, which are by now observed over a wide range of operating conditions, show a spontaneous improvement in particle and energy confinement after a short L-phase at the beginning of neutral injection. H-discharges yield high βp values comparable to the aspect ratio A (βp⩽2.65~0.65 A). The most important parameter for transition to the H-mode seems to be a high edge electron temperature: Te values of -600 eV only a few centimeters inside the separatrix with radial gradients of ~300 eV/cm are measured. This requirement of high edge temperatures explains the lack of success in obtaining the H-regime in limiter discharges. Numerical simulation of the broad ne and Te profiles typical of H-mode plasmas indicates a reduction in electron thermal diffusivity by a factor of typically 2 over the entire plasma. H-mode energy confinement times are found to scale linearly with current, but to have little dependence on plasma density and absorbed beam power (PNI⩽3.4MW). The confinement is degraded by a fast growing mode localized at the plasma edge that may be identified as a kink or tearing mode driven unstable by the high current densities at the edge.