Liver structure and function in 10 patients with extrahepatic biliary atresia were studied after portoenteric anastomosis (Kasai operation). Bile flow adequate to reduce the serum bilirubin concentration was established in five patients (improved group), three of whom became anicteric. The serum bilirubin concentration did not decrease in the remaining five patients (unimproved group). Hepatic effluent collected postoperatively from both groups contained small amounts of cholesterol and bilirubin; bile salts, however, were present in the hepatic effluent of only the improved patients. Liver biopsy specimens obtained postoperatively from the five improved patients showed partial (in two) or complete (in three) relief of cholestasis; hepatic fibrosis, however, was unchanged (in one) or worse (in four). The serum concentrations of bile salts were markedly elevated, despite normal excretion of sodium sulfobromophthalein and rose bengal, in two anicteric patients studied 14 and 24 months postoperatively. It is concluded that neither structure nor function of the liver is normalized by portoenterostomy even in clinically well, anicteric patients.