The liver in an adult healthy body maintains a balance between cell gain and cell loss. Though normally proliferatively quiescent, hepatocyte loss such as that caused by partial hepatectomy, uncomplicated by virus infection or inflammation, invokes a rapid regenerative response to restore liver mass. This restoration of moderate cell loss and ‘wear and tear’ renewal is largely achieved by hepatocyte self-replication. Furthermore, hepatocyte transplants in animals have shown that a certain proportion of hepatocytes can undergo significant clonal expansion, suggesting that hepatocytes themselves are the functional stem cells of the liver. More severe liver injury can activate a potential stem cell compartment located within the intrahepatic biliary tree, giving rise to cords of bipotential so-called oval cells within the lobules that can differentiate into hepatocytes and biliary epithelial cells. A third population of stem cells with hepatic potential resides in the bone marrow; these haematopoietic stem cells can contribute to the albeit low renewal rate of hepatocytes, make a more significant contribution to regeneration, and even completely restore normal function in a murine model of hereditary tyrosinaemia. How these three stem cell populations integrate together to achieve a homeostatic balance is not known. This review focuses on two major aspects of liver stem cell biology: firstly, the identity of the liver stem cells, and secondly, their potential value in the treatment of major liver disease. Copyright © 2002 John Wiley & Sons, Ltd.