Proliferation of adult rat hepatocytes is observed in serum-free Dulbecco's modified Eagle's medium (DMEM) supplemented with 10 mmol/L nicotinamide and 10 ng/mL epidermal growth factor (EGF). The proliferating cells are mainly mononucleate and form small cell colonies surrounded by mature hepatocytes. Although these cells in focal colonies have a less-differentiated appearance, immunocytochemically and ultrastructurally they possess hepatic characteristics. The size of small hepatocytes is one-third to half that of mature hepatocytes. Therefore, we call the cells forming a colony, small hepatocytes. The small hepatocytes can be subcultured for several passages. Furthermore, the cells are rich in the supernatant following 50 g centrifugation for 1 min after collagenase liver perfusion. When the cells are cultured in DMEM supplemented with 10% foetal bovine serum, 10 mmol/L nicotinamide, 1 mmol/L ascorbic acid 2-phosphate, 10 ng/mL EGF and 1% dimethyl sulphoxide, each small hepatocyte can clonally proliferate for more than 3 months. A small hepatocyte divides to form a colony and the number of cells reaches more than 100 within 20 days. With time in culture, cells with a large cytoplasm appear within a colony. They have many mitochondria and large peroxisomes with crystalline nucleoids and are typical, mature hepatocytes. Immunoreactivity to connexin 32 and well-developed bile canaliculus structures are often observed in the cell-cell borders. Thus, we suggest that small hepatocytes may be considered to be 'committed progenitor cells' that can further differentiate into mature hepatocytes.