Hibernate version:2.1

Mapping documents:N/A

Code between sessionFactory.openSession() and session.close():N/A

Full stack trace of any exception that occurs:N/A

Name and version of the database you are using:PostgreSQL 7.4

The generated SQL (show_sql=true):N/A

Debug level Hibernate log excerpt:N/A

When using a multi-master replicated DBMS with Hibernate, the replicated updates may change the database on Hibernate's back, which might in turn cause the objects in the Hibernate cache invalid. How does hibernate handle this issue? Thanks, Stan

I can't answer because the problem is very geenric, but a good apporach is to use optimistic locking.
Not 2nd level caching a living data is a good idea too. Do no overuse 2nd level cache.