Oval cells may function as facultative liver stem cells and tumor progenitors in liver carcinogenesis. The authors determined whether oval cells proliferate and if small hepatocytes might be generated from epithelial cell progenitors in noncarcinogenic liver injury. The authors found that oval cells similar to those detected in early carcinogenesis proliferate in response to D-galactosamine (GaIN). Oval cells expressed gamma-glutamyl transpeptidase activity, bile duct-type cytokeratins and peanut agglutinin binding. Two unusual types of hepatocytes also appeared after injury: small hepatocytes (less than or equal to 16 microns in diameter) and hepatocytes lining atypical ductlike structures. In situ hybridization studies showed that the fetal form of alphafetoprotein mRNA was expressed by many oval cells, some bile duct cells, and occasional hepatocytes. By following the fate of epithelial cells labeled early after GaIN administration, the authors conclude that duct cells can generate both oval cells and small hepatocytes in response to GaIN.