The efficiency of liver regeneration in response to the loss of hepatocytes is widely acknowledged, and this is usually accomplished by the triggering of normally proliferatively quiescent hepatocytes into the cell cycle. However, when regeneration is defective, tortuous ductular structures, initially continuous with the biliary tree, proliferate and migrate into the surrounding hepatocyte parenchyma. In humans, these biliary cells have variously been referred to as ductular structures, neoductules and neocholangioles, and have been observed in many forms of chronic liver disease, including cancer. In experimental animals, similar ductal cells are usually called oval cells, and their association with impaired regeneration has led to the conclusion that they are the progeny of facultative stem cells. Oval cells are of considerable biological interest as 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. This review proposes that the liver harbours stem cells that are located in the biliary epithelium, that oval cells are the progeny of these stem cells, and that these cells can undergo massive expansion in their numbers before differentiating into hepatocytes. This is a conditional process that 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. We focus on the biliary network, not merely as a conduit for bile, but also as a cell compartment with the ability to proliferate under appropriate conditions and give rise to fully differentiated hepatocytes and other cell types.