Autosomal recessive polycystic kidney disease (ARPKD) is an important cause of liver- and renal-related morbidity and mortality in childhood. Recently, PKHD1, the gene encoding the transmembrane protein polyductin, was shown to be mutated in ARPKD patients. We here describe the first mouse strain, generated by targeted mutation of Pkhd1. Due to exon skipping, Pkhd1ex40 mice express a modified Pkhd1 transcript and develop severe malformations of intrahepatic bile ducts. Cholangiocytes maintain a proliferative phenotype and continuously synthesize TGF-beta1. Subsequently, mesenchymal cells within the hepatic portal tracts continue to synthesize collagen, resulting in progressive portal fibrosis and portal hypertension. Fibrosis did not involve the hepatic lobules, and we did not observe any pathological changes in morphology or function of hepatocytes. Surprisingly and in contrast to human ARPKD individuals, Pkhd1ex40 mice develop morphologically and functionally normal kidneys. In conclusion,our data indicate that subsequent to formation of the embryonic ductal plate, dysgenesis of terminally differentiated bile ducts occurs in response to the Pkhd1ex40 mutation. The role of polyductin in liver and kidney may be functionally divergent, because protein domains essential for bile duct development do not affect nephrogenesis in our mouse model.