This paper reviews the fine structure and function of hepatocytes during fetal and postnatal development. Bile canaliculi develop to a mature appearance during perinatal and early postnatal periods, while bile secretory function is immature at birth and develops during the postnatal period. The rough endoplasmic reticulum is prominent and remains unchanged in amount during development, and the Golgi complex is large from early stages of fetal life. The smooth endoplasmic reticulum (SER) appears shortly before birth and increases in quantity to the adult level after birth. In mouse hepatocytes, Sv (area per unit cytoplasmic volume) of SER increases in perivenular cells between 1 and 10 days of age, although it remains low in periportal cells. Similarly, Sv of total ER increases in both periportal and perivenular cells between 1 and 5 days of age and then becomes greater in perivenular than periportal cells. This suggests that the postnatal increase in the drug-metabolizing capacity occurs predominantly in perivenular hepatocytes. SER proliferates after phenobarbital (PB) administration in both perivenular and periportal cells in 3-, 5-, and 10-day-old mice, and predominantly in perivenular cells in 20-day-old and adult mice. Thus the conspicuous proliferation of SER in perivenular hepatocytes after PB administration, characteristic of adult liver, becomes manifest during postnatal development. In mouse hepatocytes, Vv (volume per unit cytoplasmic volume) of mitochondrial matrix and peroxisomes and Sv of mitochondrial inner membrane and cristae increase in both periportal and perivenular cells between birth and 10 days of age. Then, Vv of mitochondrial matrix remains unchanged in periportal cells but decreases in perivenular cells. In general, the process of postnatal hepatocyte differentiation appears to include several phases of development; cell organelles develop during the early postnatal period, subsequently the cells undergo both functional and structural heterogeneity, and the late postnatal period after weaning is the time for a marked increase in cell size.