Tissue-engineered models that mimic in vivo tissue organization offer the potential of capturing complex signaling pathways in vitro. In the liver, hepatocytes and endothelial cells are closely associated but separated by the extracellular matrix of the space of Disse. This unique configuration was mimicked by embedding primary hepatocytes in collagen gel and overlaying the matrix with endothelial cells. We demonstrate that during the first few days of culture, the secretion of albumin and fibrinogen was 2-fold higher in cocultures compared to hepatocytes alone. Hepatocyte function in both cultures stabilized to a similar level during the second week, suggesting that endothelial cells can induce the early recovery of hepatocytes after isolation and seeding. Endothelial cell-conditioned medium reproduced the effect of coculture in a dose-dependent fashion, suggesting a role for endothelial cell-derived soluble factors. Endothelial cell-conditioned medium increased mRNA levels of various acute-phase proteins such as albumin, fibrinogen, transferrin, and alpha-macroglobulin in hepatocytes. Surprisingly, the effect of endothelial cell-conditioned medium was not mediated by growth factors or cytokines, or by secreted extracellular matrix, but by the release of the amino acid proline, which mediates endogenous collagen synthesis by hepatocytes. These findings suggest an important role for proline secretion by endothelial cells as a paracrine factor regulating hepatocyte function.