The ability of the liver to regenerate after parenchymal damage is usually accomplished by the ephemeral entry of normally proliferatively quiescent (G0) hepatocytes into the cell cycle. However, when hepatocyte regeneration is defective, arborizing ductules which are continuous with the biliary tree, proliferate and migrate into the surrounding parenchyma. In man these biliary cells have variously been referred to as ductular structures, neoductules and neocholangioles, and have been observed in many forms of chronic liver disease, including cancer. In experimental animals similar ductal cells are usually called oval cells, and their association with defective regeneration has led to the belief that these cells represent a progenitor cell population. Oval cells are thought to take over the burden of regenerative growth after substantial hepatocyte loss, suggesting that they are the progeny of facultative stem cells. The liver is not, however, generally considered as a stem cell-fed hierarchy, although this is disputed by others. Despite this, the subject of oval cells has aroused intense interest as these cells may represent a target population for hepatic carcinogens, and they may be useful vehicles for ex vivo gene therapy. This review proposes that the liver does harbour stem cells which are located throughout the biliary epithelium, and that oval cells represent the progeny of these stem cells and function as an amplification compartment for the generation of 'new' hepatocytes. This is a conditional process which only occurs when the regenerative capacity of hepatocytes is overwhelmed and thus, unlike the intestinal epithelium, the liver is not behaving as a classical continually renewing stem cell-fed lineage. We focus on the biliary network, not merely as a conduit for bile, but also as a cell compartment with the potential to proliferate under appropriate conditions and give rise to fully differentiated hepatocytes and other cell types.