We investigated the mechanism of phenotypic plasticity of hepatocytes in a three-dimensional organoid culture system, in which hepatocytic spheroids were embedded within a collagen gel matrix. Hepatocytes expressed several bile duct markers including cytokeratin (CK) 19 soon after culture and underwent branching morphogenesis within the matrix in the presence of insulin and epidermal growth factor. Cultured hepatocytes did not express Delta-like, a specific marker for oval cells and hepatoblasts. Furthermore, hepatocytes isolated from c-kit mutant rats (Ws/Ws), which are defective in proliferation of oval cells, showed essentially the same phenotypic changes as those isolated from control rats. The bile duct-like differentiation of hepatocytes was associated with increased expression of Jagged1, Jagged2, Notch1, and several Notch target genes. CK19 expression and branching morphogenesis were inhibited by dexamethasone, a mitogen-activated protein kinase kinase 1 (MEK1) inhibitor (PD98059), and a phosphatidyl inositol 3-kinase inhibitor (LY294002). After being cultured for more than 3 weeks within the gels, hepatocytes transformed into ductular structures surrounded by basement membranes. Our results suggest that hepatocytes might have the potential to transdifferentiate into bile duct-like cells without acquiring a stem-like phenotype and that this is mediated through specific protein tyrosine phosphorylation pathways.