The ability of the liver to regenerate is widely acknowledged, and this is usually accomplished by the entry of normally proliferatively quiescent hepatocytes into the cell cycle. However, when hepatocyte regeneration is impaired, small bile ducts proliferate and invade into the adjacent hepatocyte parenchyma. In humans and experimental animals these ductal cells are referred to as oval cells, and their association with defective regeneration has led to the belief that they are the progeny of facultative stem cells. Oval cells are of great biological interest since they may represent a target population for hepatic carcinogens, and they may also be useful vehicles for ex vivo gene therapy for the correction of inborn errors of metabolism. The ability of oval cells to differentiate into hepatocytes has been demonstrated unequivocally. However, this process only occurs when the regenerative capacity of hepatocytes is overwhelmed, and thus, unlike the intestinal epithelium, the liver is not behaving as a classical continually renewing stem cell-fed lineage.