The invasive nature of surgery and limited numbers of donor livers for end-stage patients has prompted the search for alternative cell therapies for intractable hepatic disease. Hepatocyte transplantations have been performed for a variety of indications, but sustained benefits have not been observed in most cases. Rat fetal liver epithelial cells (liver stem cells) have demonstrated self-renewal in vivo and functional repopulation of the liver. We have previously isolated and expanded epithelial progenitor cells (EPC) from the human fetal liver to investigate their differentiation potential. In this study, we applied suppression of immunorejection by adenoviral CTLA4Ig gene delivery mediated to examine the survival and differentiation of human fetal EPC transplanted into normal mouse liver. The grafted EPC showed extensive proliferation at both 1 and 2 months after transplantation compared with controls. Moreover, most EPC differentiated into hepatocytes, while a small fraction became bile ductular cells. This finding suggested that human fetal EPC may be a ideal source of cell-based therapy for various liver diseases.