The physiological function of the liver – such as removal of pathogens and antigens from the blood, protein synthesis and metabolism – requires an immune response that is adapted to these tasks and is locally regulated. Pathogenic microorganisms must be efficiently eliminated while the large number of antigens derived from the gastrointestinal tract must be tolerized. From experimental observations it is evident that the liver favours the induction of tolerance rather than the induction of immunity. The liver probably not only is involved in transplantation tolerance but contributes as well to tolerance to orally ingested antigens (entering the liver with portal‐venous blood) and to containment of systemic immune responses (antigen from the systemic circulation entering the liver with arterial blood). This review summarizes the experimental data that shed light on the molecular mechanisms and the cell populations of the liver involved in local immune regulation in the liver. Although hepatocytes constitute the major cell population of the liver, direct interaction of hepatocytes with leukocytes in the blood is unlikely. Sinusoidal endothelial cells, which line the hepatic sinusoids and separate hepatocytes from leukocytes in the sinusoidal lumen, and Kupffer cells, the resident macrophage population of the liver, can directly interact with passenger leukocytes. In the liver, clearance of antigen from the blood occurs mainly by sinusoidal endothelial cells through very efficient receptor‐mediated endocytosis. Liver sinusoidal endothelial cells constitutively express all molecules necessary for antigen presentation (CD54, CD80, CD86, MHC class I and class II and CD40) and can function as antigen‐presenting cells for CD4+ and CD8+ T cells. Thus, these cells probably contribute to hepatic immune surveillance by activation of effector T cells. Antigen‐specific T‐cell activation is influenced by the local microenvironment. This microenvironment is characterized by the physiological presence of bacterial constituents such as endotoxin and by the local release of immunosuppressive mediators such as interleukin‐10, prostaglandin E2 and transforming growth factor‐b. Different hepatic cell populations may contribute in different ways to tolerance induction in the liver. In vitro experiments revealed that naive T cells are activated by resident sinusoidal endothelial cells but do not differentiate into effector T cells. These T cells show a cytokine profile and a functional phenotype that is compatible with the induction of tolerance. Besides sinusoidal endothelial cells, other cell populations of the liver, such as dendritic cells, Kupffer cells and perhaps also hepatocytes, may contribute to tolerance induction by deletion of T cells through induction of apoptosis.