The intrahepatic biliary epithelium is susceptible to extensive T-cell- mediated damage during primary biliary cirrhosis, primary sclerosing cholangitis, and hepatic allograft rejection. During these processes, human intrahepatic biliary epithelial cells (HIBEC) become activated and express high levels of the lymphocyte adhesion molecules, intercellular adhesion molecule-1 (ICAM-1) and lymphocyte-associated antigen (LFA)-3, and of class II MHC antigens. It follows that activated HIBEC may also play a direct role in the activation of antigen-specific CD4+ T lymphocytes. The capacity of class II MHC antigen-expressing HIBEC to present antigen and induce specific proliferation of CD4+ T cells was examined in this study. Lines of purified HIBEC were activated by culture with the proinflammatory cytokines interferon γ (IFN-γ) and tumor necrosis factor a and were mixed in coculture with allogeneic CD4+ T cells. The result of interaction between these cells was assessed by measurement of lymphoproliferation and IL-2 production. Class II MHC antigen-expressing HIBEC failed to induce either lymphoproliferation or IL-2 production. However, both of these parameters of T-cell activation were positive in cocultures when a costimulation signal was delivered to T cells by adding bivalent anti-CD28 antibodies. The antigen-specific activation of these T cells was further enhanced by the addition of a cross-linking secondary antibody that caused CD28 receptor aggregation. The failure of cytokine-stimulated HIBEC to induce T-cell activation is consistent with the observation that HIBEC do not express the costimulatory CD28 ligands B7-1 or B7-2 at either mRNA or protein levels. It may be concluded that HIBEC are unlikely to play a direct role in activation of antigen-specific CD4+ T lymphocytes within the inflamed liver.