We took advantage of the proliferative and permissive environment of the developing preimmune fetus to develop a noninjury large animal model in sheep, in which the transplantation of defined populations of human hematopoietic stem cells resulted in the establishment of human hematopoiesis and led to the formation of significant numbers of long-lasting, functional human liver cells, with some animals exhibiting levels as high as 20% of donor (human) hepatocytes 11 months after transplantation. A direct correlation was found between hepatocyte activity and phenotype of transplanted cells, cell dose administered, source of cells used on a cell-per-cell basis (bone marrow, cord blood, mobilized peripheral blood), and time after transplantation. Human hepatocytes generated in this model retained functional properties of normal hepatocytes, constituted hepatic functional units with the presence of human endothelial and biliary duct cells, and secreted human albumin that was detected in circulation. Transplanting populations of hematopoietic stem cells can efficiently generate significant numbers of functional hepatic cells in this noninjury large animal model and thus could be a means of ameliorating or curing genetic diseases in which a deficiency of liver cells or their products threatens the life of the fetus or newborn.