Previous immunohistochemical studies on human liver biopsies with chronic ductular reaction revealed the presence of" small cells" with bile-duct type cytokeratin profile in the periportal area. This study identified similar cells by electron microscopy. The authors studied 13 human liver specimens with various liver diseases, but all characterized by chronic ductular reaction. In all specimens, variable numbers of" small cells" with common epithelial characteristics were identified in the periportal area. They could be classified into three types. Type I cells showed an oval cell shape and oval nucleus, early or established formation of junctional complexes with adjacent cells, a full assortment of cytoplasmic organelles, and bundles of tonofilaments. Type II cells showed features of bile-duct cell differentiation, including lateral interdigitations, apical microvilli, basal pinocytotic vacuoles, and basement membrane formation. In contrast, type III cells displayed additional features indicating hepatocellular differentiation, such as a more prominent nucleus, formation of a hemicanaliculus, and glycogen rosettes. It is concluded that these small cells of epithelial nature display variable differentiation characteristics of either bile-duct type cells or hepatocytes. These findings support the existence of bipotential progenitor epithelial cells in human liver. They may have implications for liver regeneration and carcinogenesis.