Liver fibrosis results from excessive proliferation of, and collagen production by hepatic stellate cells (HSCs) that is caused by chronic liver injury. No drugs are available to cure liver fibrosis. Hydroxyurea is an anti‐proliferative drug that is used in benign and malignant disorders. Here, we studied the effect of hydroxyurea on primary HSCs and its anti‐fibrotic effect in the CCl4 mouse model of liver fibrosis. Primary rat HSCs were cultured in the absence or presence of hydroxyurea (0.1–1.0 mmol/L). CCl4 or vehicle was administered to C57BL/6/J mice for 4 weeks, with or without hydroxyurea (100 mg/kg/day) co‐treatment. We used real‐time cell proliferation analysis, Oil Red O (lipid droplet) staining, immunohistochemistry, Acridine Orange staining (apoptosis), Sytox green staining (necrosis), RT‐qPCR, ELISA, and Western Blotting for analysis. Hydroxyurea dose‐dependently suppressed lipid droplet‐loss and mRNA levels of Col1α1 and Acta2 in transdifferentiating HSCs. In fully‐activated HSCs, hydroxyurea dose‐dependently attenuated PCNA protein levels and BrdU incorporation, but did not reverse Col1α1 and Acta2 mRNA expression. Hydroxyurea did not induce apoptosis or necrosis in HSCs or hepatocytes. Hydroxyurea suppressed accumulation of desmin‐positive HSCs and hepatic collagen deposition after CCl4 treatment. CCl4‐induced regenerative hepatocyte proliferation, Col1α1 and Acta2 mRNA expression and α‐SMA protein levels were not affected. This study demonstrates that hydroxyurea inhibits HSC proliferation in vitro and attenuates early development of liver fibrosis in vivo, while preserving hepatocyte regeneration after toxic insults by CCl4. Thus, hydroxyurea may have therapeutic value against liver fibrosis.