Infections of Reoviridae consisting of a double-stranded RNA (dsRNA) genome and the biliary innate immune response to dsRNA are implicated in the aetiopathogenesis of biliary atresia (BA). Epithelial–mesenchymal transition (EMT) has recently been proposed as a mechanism behind the sclerosing cholangitis in BA. We hypothesized that the innate immune response to dsRNA in biliary epithelial cells plays an important role in peribiliary fibrosis via biliary EMT. Experiments using cultured human biliary epithelial cells revealed that stimulation with poly(I : C) (a synthetic analogue of viral dsRNA) increased the expression of basic fibroblast growth factor (bFGF, an EMT-inducer), S100A4 (a mesenchymal marker) and Snail (a transcriptional factor), and decreased that of epithelial markers (biliary-type cytokeratin 19 and E-cadherin) and Bambi (TGF-β1 pseudoreceptor). The expression of TGF-β1 (EMT-inducer) and vimentin (a mesenchymal marker) was not affected by poly(I : C). Both EMT-inducers, bFGF and TGF-β1, evoked a decrease and increase in the expression of the epithelial markers and of vimentin respectively, and the expression of Bambi was down-regulated on stimulation with bFGF. Combined treatment with bFGF and TGF-β1 quickly and completely induced a transformation of morphology as well as change from epithelial to mesenchymal features in cultured biliary epithelial cells. Immunohistochemistry revealed that biliary epithelial cells lining extrahepatic bile ducts and peribiliary glands in BA frequently show a lack of epithelial markers and an aberrant expression of vimentin. Moreover, the biliary epithelium showing sclerosing cholangitis expressed bFGF accompanied by bFGF-positive mononuclear cells. In conclusion, the EMT may contribute to the histogenesis of sclerosing cholangiopathy, and the biliary innate immune response to dsRNA viruses induces biliary epithelial cells to undergo EMT via the production of bFGF and the increased susceptibility to TGF-β1 caused by the down-regulation of Bambi expression. Copyright © 2009 Pathological Society of Great Britain and Ireland. Published by John Wiley & Sons, Ltd.