Liver parenchymal cells (hepatocytes) have a low rate of turnover, but can nevertheless mount a rapid and efficient regenerative response. However, in some cases of extreme hepatotoxicity hepatocyte proliferation is restricted or even abolished, and instead biliary epithelial cells, commonly referred to as ductular oval cells, migrate into the periportal and midzonal parenchyma. Initially these cells behave as authentic biliary epithelium with expression of the biliary cytokeratin intermediate filaments, but then show hepatocytic traits such as alpha fetoprotein and albumin synthesis. Thereafter these biliary ducts rapidly vanish to be replaced by either small hepatocytes or intestinal-type cells. The proliferation and differentiation of oval cells is probably strongly influenced by paracrine signalling from liver stellate cells. Oval cells appear to be the progeny of facultative pluripotential stem cells which have the lineage potential of uncommitted gastrointestinal stem cells; these stem cells are likely to be located in the cholangioles and small interlobular bile ducts. Oval cells thus constitute an important reserve compartment for hepatocytes when hepatocyte regeneration is compromised.