Proteoglycans are a major component of the normal hepatic extracellular matrix and undergo quantitative and qualitative changes in hepatic fibrosis. The cellular sources of proteoglycans are as yet incompletely defined. We examined this question using primary cultures of hepatocytes and lipocytes isolated from normal rat liver. Proteoglycan synthesis was assessed by measuring production of sulfated glycosaminoglycan, the polysaccharide moiety of proteoglycans. The findings indicate that lipocytes produce sixfold more glycosaminoglycan, per cell, than do hepatocytes. Two-thirds of the newly synthesized material is cell- or matrix-associated. Of the individual glycosaminoglycan species produced by lipocytes, dermatan sulfate represents 60% of the total; heparan sulfate and chondroitin sulfate are measurable but relatively minor. In hepatocyte cultures, heparan sulfate accounted for essentially all of the glycosaminoglycan detected. We conclude that lipocytes are an important source of proteoglycan in normal liver and may be the principal source of dermatan sulfate associated with hepatic fibrosis.