Recently it was shown that a population of cells in the bone marrow-expressing hematopoietic stem cell antigens could differentiate into hepatocytes. However, explicitly committed hepatocyte progenitors, which exhibit highly differentiated liver functions, immediately upon isolation, have not yet been isolated from bone marrow. After studying common antigens on blast-like cells in fetal and adult regenerating cholestatic rat livers and human regenerating and malignant livers, we hypothesized that beta-2-microglobulin-negative (beta (2)m(-)) cells might represent dedifferentiated hepatocytes and/or their progenitors. Utilizing a two-step magnetic bead cell-sorting procedure, we show that in bone marrow from rat and human, beta (2)m(-)/Thy-1(+) cells consistently express liver-specific genes and functions. After intraportal infusion into rat livers, bone marrow-derived hepatocyte stem cells (BDHSC) integrated with hepatic cell plates and differentiated into mature hepatocytes. In a culture system simulating liver regeneration and containing cholestatic serum, these cells differentiated into mature hepatocytes and metabolized ammonia into urea. This differentiation was dependent on a yet nondescript humoral signal existing in the cholestatic serum. Transmission electron microscopy and three-dimensional digital reconstruction confirmed hepatocyte ultrastructure of cultured BDHSC.