The liver contains a population of small bipotential facultative progenitor cells that reconstitute liver function when mature hepatocytes or cholangiocytes are unable to proliferate. Mesenchymal markers, including members of the forkhead transcription factor gene family, have been detected in hepatic progenitor cells. The winged helix transcription factor Foxl1 localizes to mesenchymal cells in the intestine; however, its expression in the liver has not been reported. We found that Foxl1 is expressed in rare cells in the normal liver but is dramatically induced in the livers of mice that have undergone bile duct ligation or were fed a 3,5‐diethoxycarbonyl‐1,4‐dihydrocollidine (DDC)‐containing or choline‐deficient, ethionine‐supplemented diet. In addition, we employed genetic lineage tracing using a Foxl1‐Cre transgenic mouse crossed with the Rosa26R lacZ reporter line to demonstrate that Foxl1‐Cre‐expressing cells are present within the periportal region shortly after injury. These cells give rise to both hepatocytes [marked by hepatocyte nuclear factor 4 alpha (HNF‐4α) expression] and cholangiocytes (marked by CK19 expression), indicating that these cells are derived from Foxl1‐Cre–expressing cells. Foxl1‐Cre–expressing cells are distinct from hepatic stellate cells, portal fibroblasts, and myofibroblasts, although they are located in close proximity to portal fibroblasts. These results demonstrate that the early Foxl1‐Cre lineage cell gives rise to both cholangiocytes and hepatocytes after liver injury and suggest the potential for progenitor‐portal fibroblast cell interactions. Conclusion: We propose that Foxl1 is a bona fide marker of the facultative progenitor cell in the mouse liver. (HEPATOLOGY 2009.)