Adult hepatic progenitor cells are activated during regeneration when hepatocytes and bile duct epithelium are damaged or unable to proliferate. On the basis of its role as a tumor suppressor and in the potential malignant transformation of stem cells in hepatocellular carcinoma, we investigated the role of key transforming growth factor beta (TGF-beta) signaling components, including the Smad3 adaptor protein beta2-Spectrin (beta2SP), in liver regeneration. We demonstrate a streaming hepatocyte-specific dedifferentiation process in regenerating adult human liver less than 6 weeks following living donor transplantation. We then demonstrate a spatial and temporal expansion of TGF-beta signaling components, especially beta2SP, from the periportal to the pericentral zone as regeneration nears termination via immunohistochemical analysis. This expansion is associated with an expanded remaining pool of octamer 3/4 (Oct3/4)-positive progenitor cells localized to the portal tract in adult human liver from more than 6 weeks posttransplant. Furthermore, disruption of TGF-beta signaling as in the beta2SP (beta2SP+/-) knockout mouse demonstrated a striking 2 to 4-fold (P < 0.05) expanded population of Oct3/4-positive cells with activated Wnt signaling occupying an alpha-fetoprotein (AFP)+/cytokeratin-19 (CK-19)-positive progenitor cell niche following two-thirds partial hepatectomy.TGF-beta signaling, particularly beta2SP, plays a critical role in hepatocyte proliferation and transitional phenotype and its loss is associated with activation of hepatic progenitor cells secondary to delayed mitogenesis and activated Wnt signaling.