Loss of hepatic tissue triggers a regenerative response in the whole organ. Under typical normal conditions, all hepatic cells (epithelial: hepatocytes and biliary epithelial cells; non-epithelial: stellate cells, macrophages and endothelial cells) undergo one to three rounds of replication to establish the original number of cells and restore organ size. The review summarizes the literature of regenerative patterns in situations in which proliferation of either hepatocytes or biliary epithelial cells is inhibited. The evidence strongly suggests that under these circumstances, hepatocytes or biliary epithelial cells can function as facultative stem cells for each other and replenish the inhibited cellular compartment by a process of transdifferentiation, involving complex signaling pathways. These pathways are activated under experimental conditions in rodents and in fulminant hepatitis associated with liver failure in humans. Mechanistic analysis of these pathways has implications for liver biology and for potential therapeutic modalities in human liver disease.