The generation of functional hepatocytes independent of donor liver organs is of great therapeutic interest with regard to regenerative medicine and possible cures for liver disease. Induced hepatic differentiation has been achieved previously using embryonic stem cells or induced pluripotent stem cells. Particularly, hepatocytes generated from a patient's own induced pluripotent stem cells could theoretically avoid immunological rejection. However, the induction of hepatocytes from induced pluripotent stem cells is a complicated process that would probably be replaced with the arrival of improved technology. Overexpression of lineage-specific transcription factors directly converts terminally differentiated cells into some other lineages, including neurons, cardiomyocytes and blood progenitors; however, it remains unclear whether these lineage-converted cells could repair damaged tissues in vivo. Here we demonstrate the direct induction of functional hepatocyte-like (iHep) cells from mouse tail-tip fibroblasts by transduction of Gata4, Hnf1α and Foxa3, and inactivation of p19(Arf). iHep cells show typical epithelial morphology, express hepatic genes and acquire hepatocyte functions. Notably, transplanted iHep cells repopulate the livers of fumarylacetoacetate-hydrolase-deficient (Fah(-/-)) mice and rescue almost half of recipients from death by restoring liver functions. Our study provides a novel strategy to generate functional hepatocyte-like cells for the purpose of liver engineering and regenerative medicine.