Ductular reaction refers to an increased number of ductules (the finest ramifications of the biliary tree), accompanied by polymorphonuclear leukocytes and an increase in matrix, leading to periportal fibrosis and eventually biliary cirrhosis. It is a phenomenon that is seen in a variety of liver diseases, such as acute and chronic cholestasis and variable degrees of parenchymal necrosis. Ductular reaction has gained new interest because of its relationship with putative human liver progenitor cells. The existence of progenitor cells in a quiescent organ such as the liver, although still controversial, is important for the understanding of biological processes, such as embryogenesis, carcinogenesis, and regeneration. This article provides a diagnostic algorithm: Starting from the phenomenon of ductular reaction, portal tract and parenchymal changes that give diagnostic clues are systematically described.