The precise role of IL-6 in liver regeneration and hepatocyte proliferation is controversial and the role of SOCS3 in liver regeneration remains unknown. Here we show that in vitro treatment with IL-6 inhibited primary mouse hepatocyte proliferation. IL-6 induced p21^cip1 protein expression in primary mouse hepatocytes. Disruption of the p21^cip1 gene abolished the inhibitory effect of IL-6 on cell proliferation. Co-culture with nonparenchymal liver cells diminished IL-6 inhibition of hepatocyte proliferation, which was likely due to IL-6 stimulation of nonparenchymal cells to produce HGF. Finally, IL-6 induced higher levels of p21^cip1 protein expression and a slightly stronger inhibition of cell proliferation in SOCS3^+/− mouse hepatocytes compared to wild-type hepatocytes, while liver regeneration was enhanced and prolonged in SOCS3^+/− mice. Our findings suggest that IL-6 directly inhibits hepatocyte proliferation via a p21^cip1-dependent mechanism and indirectly enhances hepatocyte proliferation via stimulating nonparenchymal cells to produce HGF. SOCS3 negatively regulates liver regeneration.