In cholestasis, bile acids induce hepatocyte apoptosis, while activation of hepatic stellate cells (HSCs) results in fibrosis. Since transforming growth factor-beta (TGF-beta) is a critical mediator in this process, we hypothesized that bile acids may participate in TGF-beta-mediated HSC activation in cholestasis. Bile acid treatment increased TGF-beta transcription in hepatocytes, while the total TGF-beta concentration in culture media rapidly decreased following bile acid treatment. Bile acid treatment promptly induced thrombospondin-1 expression in hepatocytes, which is a potent activator of latent TGF-beta, whereas this induction was not observed in bile acid-treated HSCs. HSCs co-cultured with hepatocytes showed a significantly higher level of Smad2 phosphorylation and collagen alpha1 synthesis following bile acid treatment than cells cultured without hepatocytes. Moreover, this enhanced collagen synthesis was significantly inhibited in the presence of TGF-beta receptor inhibitor. These observations imply that bile acids induce thrombospondin-1 expression in hepatocytes, which activates latent TGF-beta leading to HSC activation.