Bioartificial liver provides a combination of three-dimensional support, matrix interactions, and extracellular cues to create a bio-mimic microenvironment for maintaining hepatic-specific functions of liver cells in vitro. However, its transformal and metabolic functions are not yet satisfactory for clinic application. In this study, hepatoma-derived C3A cells were co-cultured with human placental mesenchymal stem cells (hPMSC) in microspheres placed in a fluidized bioreactor. The secretion of albumin and urea, the expression of metabolizing enzymes at both transcriptional and translational levels and the drug metabolism functions of co-cultured C3A cells were determined. With the three-dimensional culture system, when C3A cells were co-cultured with hPMSCs in separate microspheres, the secretion of albumin and activity of CYP1A2 were significantly improved although the enhancement of urea synthesis and CYP3A4 activity was less prominent. Combining co-culture system with fluidization significantly increased the secretion of urea and the activities of CYP1A2, CYP3A4 but not the albumin synthesis. Interestingly, the levels of phospho-PKA (Thr 197), phospho-PKC, phospho-ERK1/2 (Thr 202/Tyr 204) and CaMKII were all found to decrease in co-cultured C3A cells, implicating suppressed signaling pathways in those cells. Taken together, our results suggest that co-culturing of liver cells with hPMSC cells in three-dimensional fluidized bioreactor significantly improved the preservation of liver cells' metabolic functions which may greatly enhance the efficacy of bioartificial liver treatment. Biotechnol. Bioeng. 2013; 110: 958–968. © 2012 Wiley Periodicals, Inc.