T ransplantation of healthy cells to repair organ damage or replace deficient functions constitutes a major goal of cell therapy. However, the mechanisms by which transplanted cells engraft, proliferate, and function remain unknown. To investigate whether host liver sinusoidal endothelium could be replaced with transplanted liver sinusoidal endothelial cells, we developed an animal model of tissue replacement that utilized a genetic system to identify transplanted cells and induced host-cell perturbations to confer a proliferative advantage to transplanted cells. Under these experimental conditions, transplanted cells engrafted efficiently and proliferated to replace substantial portions of the liver endothelium. Tissue studies demonstrated that transplanted cells became integral to the liver structure and reacquired characteristic endothelial morphology. Characterization of transplanted endothelial cells by membrane markers and studies of cellular function, including synthesis and release of coagulation factor VIII, demonstrated that transplanted cells were functionally intact. Further analysis showed that repopulation of the livers of mice that model hemophilia A with healthy endothelial cells restored plasma factor VIII activity and corrected their bleeding phenotype. Our studies therefore suggest that transplantation of healthy endothelial cells should be considered for cell therapy of relevant disorders and that endothelial reconstitution with transplanted cells may offer an excellent paradigm for defining organ-specific pathophysiological mechanisms.