Impairment of various functions of the liver and concomitantly increased levels of parameters of liver damage, a clinical entity termed liver failure, is commonly seen after partial hepatectomy. We investigated in a rat model whether damage of the remnant liver was due to local inflammatory responses, and related to endotoxin or interleukin-1 (IL-1). To address this question, the effects of partial hepatectomy on infiltration of immunocompetent cells and expression of major histocompatibility complex (MHC) class II antigen of macrophages in the remnant liver was studied using immunohistochemical techniques. Specific intervention with recombinant N-terminal bactericidal/permeability-increasing protein (rBPI23) to neutralize endotoxin and with IL-1 receptor antagonist (IL-1ra) to block IL-1 activity was used to examine the respective roles of endotoxin and IL-1. After partial hepatectomy, we found an influx of neutrophils, an increased expression of MHC class II antigens, and morphologic changes of Kupffer cells consistent with activation. These inflammatory events coincided with increased serum levels of markers of liver damage (aspartate aminotransferase, alanine aminotransferase, ammonia). Both neutralization of endotoxin and blocking of IL-1 activity reduced hepatic inflammation and reduced serum levels of aminotransferases and ammonia. In addition, liver cell proliferation as assessed by staining for proliferating cell nuclear antigen (PCNA) expression was significantly enhanced when either endotoxin or IL-1 effects were blocked. Thus, our results suggest that local hepatic inflammatory responses inhibit liver cell proliferation and promote liver failure, presumably by affecting the functional capacity of the remnant liver. (Hepatology 1995; 22:1499–1506).