We present the status of PEPSI, the bench-mounted fibre-fed and stabilized "Potsdam Echelle Polarimetric and Spectroscopic Instrument" for the 2×8.4m Large Binocular Telescope in southern Arizona. PEPSI is under construction at AIP and is scheduled for first light in 2009/10. Its ultra-high-resolution mode will deliver an unprecedented spectral resolution of approximately R=310,000 at high efficiency throughout the entire optical/red wavelength range 390-1050nm without the need for adaptive optics. Besides its polarimetric Stokes IQUV mode, the capability to cover the entire optical range in three exposures at resolutions of 40,000, 130,000 and 310,000 will surpass all existing facilities in terms of light-gathering-power times spectral-coverage product. A solar feed will make use of the spectrograph also during day time. As such, we hope that PEPSI will be the most powerful spectrometer of its kind for the years to come.