Extrahepatic biliary atresia is a severe neonatal liver disease resulting from a sclerosing cholangiopathy of unknown etiology. Although biliary obstruction may be surgically corrected by a "Kasai" hepatoportoenterostomy , most patients still develop progressive hepatic fibrosis , although the source of increased collagen deposition is unclear. This study examined the role of hepatic stellate cells (HSCs) and assessed the source of transforming growth factor-␤ (TGF-␤) production in hepatic fibrogenesis in patients with biliary atresia. Liver biopsies from 18 biliary atresia patients (including 5 pre-and post-Kasai) were subjected to immunohistochemistry for ␣-smooth muscle actin and in situ hybridization for either procollagen ␣ 1 (I) mRNA or TGF-␤ 1 mRNA. Sections were also subjected to immunohistochemistry for active TGF-␤ 1 protein. The role of Kupffer cells in TGF-␤ 1 production was assessed by immunohistochemistry for CD68. Procollagen ␣ 1 (I) mRNA was colocalized to ␣-smooth muscle actin-positive HSCs within the region of increased collagen protein deposition in fibrotic septa and surrounding hyperplastic bile ducts. The number of activated HSCs was decreased in only one post-Kasai biopsy. TGF-␤ 1 mRNA expression was demonstrated in bile duct epithelial cells and activated HSCs and in hepatocytes in close proximity to fibrotic septa. Active TGF-␤ 1 protein was demonstrated in bile duct epithelial cells and activated HSCs. This study provides evidence that activated HSCs are responsible for increased collagen production in patients with biliary atresia and therefore play a definitive role in the fibrogenic process. We have also shown that bile duct epithelial cells , HSCs , and hepatocytes are all involved in the production of the profibrogenic cytokine , TGF-␤ 1 . (Am J Pathol 1998, 153:527-535)Extrahepatic biliary atresia is a progressive, sclerosing, inflammatory process in neonates, causing atresia of all or part of the extrahepatic biliary system and rapidly extending to involve the major intrahepatic biliary ducts.