Fetal hepatocytes (FHEPs) are a potential source of highly proliferative transplantable cells but express low levels of liver-specific functions. We hypothesized that the microenvironment of adult hepatocytes (AHEPs) may upregulate these functions. Primary FHEPs were seeded on top of collagen-sandwiched AHEPs directly or separated by a porous transwell membrane insert. In direct co-cultures, albumin (ALB) secretion, urea synthesis, and cytochrome P450 (CytP450) activity were all approximately 2 times as high as the sum of the corresponding monocultures. Using a transwell porous insert led to similar results, suggesting a major role for soluble factors. When AHEPs and FHEPs were separated after co-culture, they both initially showed significantly higher ALB secretion than control monocultures, whereas urea synthesis was significantly lower for the FHEPs only. Functions of previously co-cultured FHEPs normalized over the course of a week, but AHEP function remained high even after separation. In conclusion, co-culturing AHEPs with FHEPs increases expression of liver-specific functions in both cell types. The effect on FHEPs, but not AHEPs, was reversible. Unraveling the underlying mechanisms and optimizing this phenomenon will be useful in making fetal liver cells a potential cell source for hepatic tissue-engineering applications.