Biliary atresia (BA) is a devastating liver disease of unknown etiology affecting children generally within the first 3 months of life. The disease is manifested by inflammation and subsequent obstruction of the extrahepatic bile ducts, fibrosis and liver failure. The mechanisms responsible for disease pathogenesis are not fully understood, but a number of factors controlled by the SMAD signaling pathway have been implicated. In this study, we investigated the role of a known proinflammatory factor, extracellular cyclophilin A (CypA), in the pathogenesis of biliary atresia using the rhesus rotavirus (RRV) murine model. We used a unique cyclosporine A derivative, MM284, which does not enter cells and therefore inactivates exclusively extracellular cyclophilins, as a potential treatment. We demonstrated that levels of CypA in plasma of RRV-infected mice were increased significantly, and that treatment of mice with MM284 prior to or one day after disease initiation by RRV infection significantly improved the status of mice with experimental BA: weight gain was restored, bilirubinuria was abrogated, liver infiltration by inflammatory cells was reduced and activation of the SMAD pathway and SMAD-controlled fibrosis mediators and tissue inhibitor of metalloproteinases (TIMP)-4 and matrix metalloproteinase (MMP)-7 was alleviated. Furthermore, treatment of human hepatic stellate cells with recombinant cyclophilin recapitulated SMAD2/3 activation, which was also suppressed by MM284 treatment. Our data provide the first evidence that extracellular cyclophilins activate the SMAD pathway and promote inflammation in experimental BA, and suggest that MM284 may be a promising therapeutic agent for treating BA and possibly other intrahepatic chronic disorders.