Mechanisms directing position-specific liver gene regulation are incompletely understood. To establish whether this aspect of hepatic gene expression is an inveterate phenomenon, we used transplanted hepatocytes as reporters in dipeptidyl peptidase IV-deficient F344 rats. After integration in liver parenchyma, the position of transplanted cells was shifted from periportal to perivenous areas by targeted hepatic ablations with carbon tetrachloride. In controls, transplanted cells showed greater glucose-6-phosphatase and lesser glycogen content in periportal areas. This pattern was reversed when transplanted cells shifted from periportal to perivenous areas. Transplanted hepatocytes in perivenous areas exhibited inducible cytochrome P450 activity, which was deficient in periportal hepatocytes. Moreover, cytochrome P450 activity was rapidly extinguished in activated hepatocytes when these cells were transplanted into the nonpermissive liver of suckling rat pups. In cells isolated from the normal F344 rat liver, cytochrome P450 inducibility was originally greater in perivenous hepatocytes; however, periportal cells rapidly acquired this facility in culture conditions. These findings indicate that the liver microenvironment exerts supremacy over prior differentiation state of cells in directing position-specific gene expression. Therefore, persistence of specialized hepatocellular function will require interactions with regulatory signals and substrate availability, which bears upon further analysis of liver gene regulation, including in progenitor and/or stem cells.