The clinical usefulness of serum gamma-glutamyl transpeptidase (gamma GT) assay for the diagnosis of liver disease in children was assessed retrospectively in 398 children investigated from 1981 to 1986, in whom diagnosis was ascertained according to currently accepted criteria including liver histology in each case. Serum gamma GT activity was within normal limits in 10 controls, in 19 children with portal vein obstruction, and in 10 of 12 children with congenital hepatic fibrosis. Serum gamma GT was raised in all children with biliary atresia, sclerosing cholangitis, paucity of interlobular bile ducts, and alpha 1-antitrypsin deficiency with jaundice. Serum gamma GT was normal in spite of patent clinical signs of cholestasis in 3 patients with benign recurrent intrahepatic cholestasis, 1 infant with post-hemolytic neonatal cholestasis, and in 22 of 28 patients with progressive idiopathic cholestasis akin to Byler disease. In the latter group, children with raised serum gamma GT displayed extensive portal fibrosis and bile duct proliferation on liver histology, while this was not a prominent feature in children with normal serum gamma GT. These results indicate (a) the value and limits of the assay for serum gamma GT activity in children with liver disease, (b) that raised serum gamma GT may be considered a fairly reliable index of bile duct damage, and (c) that serum gamma GT may prove a useful tool in separating two forms of progressive idiopathic cholestasis, with or without bile duct involvement.