The biliary epithelial cell (BEC) is the target for several human immune mediated liver diseases, including primary biliary cirrhosis, but it is not always clear whether the BEC functions as an accessory cell or an antigen presenting cell, although it is well documented that BECs express high levels of human leukocyte antigen Class II, intercellular adhesion molecule-1, and lymphocyte function-associated antigen-3. To examine this issue, we established autoreactive T-cell clones from human leukocyte antigen-DR53 patients with primary biliary cirrhosis and characterized BEC function as a function of the ability of BECs to regulate T-cell activation. We report herein that BEC-mediated T-cell activation occurs partially via programmed death 1 ligands in a cell-contact-dependent manner. Further, such activation occurs via prostaglandin E2 production in a cell-contact-independent fashion. Moreover, the production of prostaglandin E2 was partially controlled by interleukin-1beta and tumor necrosis factor alpha. In conclusion, the regulatory activities of BECs are important for the maintenance of peripheral immune tolerance. Further, modulation of BEC function may be used for therapeutic modulation.