In the multidrug resistance protein 2 (Mdr2) mouse model, low phospholipid bile instigates biliary epithelial injury, sterile inflammation, and fibrosis, thereby recapitulating disease mechanisms implicated in biliary atresia (BA) and primary sclerosing cholangitis. We hypothesize that T lymphocytes contribute to the biliary injury and fibrosis in murine sclerosing cholangitis (SC) and that they are susceptible to suppression by regulatory T cells (Tregs). In juvenile Mdr2 mice, intrahepatic CD8+ lymphocytes were expanded, and contraction of intrahepatic Tregs coincided with rising serum alanine transferase and alkaline phosphatase (ALP) levels between days 14-30 of life. Antibody-mediated depletion of intrahepatic CD8+ lymphocytes during that time reduced ALP levels and the expression of osteopontin (Opn), a pro-fibrogenic cytokine. Depletion of intrahepatic Tregs with anti-CD25 antibody between days 7-30 increased intrahepatic CD8+ T cells, Opn expression, and fibrosis. Conversely, expansion of intrahepatic Tregs with interleukin 2/anti-interleukin 2 immune complexes (IL-2c) downregulated hepatic expression of Opn and Tnf, reduced frequency of intrahepatic CD8+ lymphocytes, and diminished biliary injury and fibrosis. Treatment with IL-2c upregulated hepatic Treg expression of CD39, an ectonucleotidase capable of hydrolyzing pro-inflammatory adenosine triphosphate. In vitro, Tregs expressing CD39 suppressed the proliferation of hepatic CD8+ lymphocytes from Mdr2 mice more efficiently than those lacking CD39. In infants with BA, infiltration of interlobular bile ducts with CD8+ cells was associated with biliary expression of Opn and its transcription was negatively correlated with mRNA expression of Treg-associated genes. Conclusion: Hepatic CD8+ T lymphocytes drive biliary injury and fibrosis in murine SC. Their proliferation is controlled by hepatic Tregs through the purinergic pathway, which is responsive to IL-2c, suggesting that Treg-directed low-dose Il-2 treatment may be considered as therapy for SC.