Hepatic stellate cells (HSC) are the major source of extracellular matrix components (ECM), if these precursor cells are activated in areas of necroinflammation to proliferate and to transdifferentiate from the retinoid storing to the ECM-producing phenotype termed myofibroblast (MFB). The mechanisms of HSC activation are crucial for the understanding of liver fibrogenesis. Activation is promoted by cytokines from Kupffer cells (KC) and platelets, of which TGF-beta is of great importance. It stimulates in HSC gene expression of ECM molecules but inhibits proliferation and induces phenotypic transdifferentiation. Latent TGF-beta is activated in cooperation with endothelial cells. TGF-alpha, also secreted by KC, stimulates HSC proliferation. In addition, hepatocytes (PC) enhance proliferation of HSC but ECM production is not affected. The mitogenic effect is mediated by TGF-alpha, IGF-1 and other cytokines. The paracrine signals of PC are increased by PC damage. During transdifferentiation MFB increasingly express TGF-beta and TGF-alpha, which are suspected to be involved in autocrine stimulation of MFB and paracrine activation of still untransformed HSC. A three-step cascade model of HSC activation is suggested. A preinflammatory phase initiates HSC activation by discharge of mitogenic cytokines (TGF-alpha, IGF-1) from damaged PC followed by the inflammatory phase based on cytokines (TGF-beta, etc.) from activated KC. In the postinflammatory phase MFB are stimulated by autocrine mechanisms contributing potentially to a perpetuation of the fibrogenic process even after cessation of the primary event (PC damage).