The origin of bile duct-like cells (oval cells) proliferating during chemical hepatocarcinogenesis is highly controversial. To illuminate this issue, we induced oval cell proliferation by feeding rats a choline-devoid diet containing 0.1% ethionine (CDE), a hepatocarcinogenic diet, for up to 60 days. At various times we studied 1) oval cell morphology by light and electron microscopy, 2) the immunohistochemical expression of albumin and intermediate filament proteins by the various hepatic cells, 3) hepatic incorporation of [3H] thymidine by histoautoradiography, 4) the fractional area occupied by duct-like structures in liver cross sections, 5) the biliary tree volume in vivo to establish the possible continuity of the proliferated structures to the existing biliary lumina, and 6) spontaneous bile flow rate and the choleretic responsiveness to the hormone secretin, which stimulates ductular secretory activity. The results demonstrated the following: 1) oval cells resemble bile duct cells with respect to their histologic and ultrastructural appearance and their formation of duct-like structures; 2) as normal and hyperplastic bile duct cells induced by bile duct ligation, oval cells are positive for cytokeratins 7 and 19 (markers of glandular epithelia) and 8 and 18 (markers of simple epithelia) and are negative for vimentin and desmin, markers of mesenchymal and muscular differentiation, respectively; 3) in general, oval cells are negative for albumin, which is expressive of hepatocyte lineage, even though a few are positive for this protein, particularly those morphologically resembling small hepatocytes; 4) after initiation of the CDE diet, DNA synthesis begins in biliary epithelial cells; and 5) the degree of oval cell proliferation parallels the increase in biliary tree volume, spontaneous bile flow rate, and responsiveness to secretin choleresis, as in bile duct cell hyperplasia induced by biliary obstruction. Although the involvement of a periductular progenitor compartment cannot entirely be eliminated, these findings are construed to indicate that oval cells proliferating during CDE hepatocarcinogenesis are biliary epithelial cells. In our view, oval cells represent the two-dimensional expression of spatially expanded cholangioles and intrahepatic bile ductules and/or ducts.