The proteasomal and lysosomal/autophagy pathways in the liver and other tissues are involved in several biological processes including the degradation of misfolded proteins. Exposure of hepatocyte cell lines to proteasome inhibitors (PIs) results in the formation of inclusions that resemble Mallory‐Denk bodies (MDBs). Keratins are essential for MDB formation and keratin 8 (K8)‐overexpressing transgenic mice are predisposed to MDB formation. We tested the hypothesis that PIs induce MDBs in vivo and that autophagy participates in MDB turnover. The effect of the PI bortezomib (which is used to treat some malignancies) on MDB formation was tested in K8‐overexpressing mice and in cultured cells. Inclusion formation was examined using immune and conventional electron microscopy (EM). Bortezomib induced MDB‐like inclusions composed of keratins, ubiquitin, and p62 in cultured cells. Short‐term exposure to bortezomib induced similar inclusions in K8‐overexpressing but not in nontransgenic mice, without causing liver injury. In bortezomib‐treated mice, autophagy was activated in hepatocytes as determined by EM and biochemical analysis. Further activation of autophagy by rapamycin (Rap) decreased the number of inclusions in bortezomib‐treated K8 transgenic mice significantly. Rap also led to resorption of spontaneously formed MDBs in aging K8‐overexpressing mice. Immune EM demonstrated K8‐positive and ubiquitin‐positive structures in autophagic vacuoles in the mouse liver. Conclusion: PIs alone are sufficient to induce MDBs in susceptible animals, while Rap‐mediated activation of autophagy prevents MDB formation and causes MDB resorption. These findings suggest that some patients treated with PIs may become predisposed to MDB formation. Autophagy provides a potential cellular mechanism for the resorption of cytoplasmic inclusions. (HEPATOLOGY 2008.)