The pathogenesis of biliary atresia (BA) is still unknown. Progression to cirrhosis despite restoration of bile flow by successful portoenterostomy suggests that it is a progressive disease of the liver and biliary tree. Whether immunologic factors play any role in the development of this disease remains uncertain. Aberrant expression of major histocompatibility complex (MHC) Class II antigens of HLA-DR on hepatocytes and biliary epithelium is regarded as important in the progression of hepatocellular and biliary damage mediated by cytotoxic T cells. This study was undertaken to evaluate expression of MHC Class II antigen and macrophage-associated antigens (CD68) in liver of patients with biliary atresia to determine their prognostic usefulness and possible role in the pathogenesis of the disease. Liver biopsy specimens from infants with BA (n = 15), neonatal hepatitis (n = 3), and normal livers (n = 6) were studied using an indirect immunoperoxidase staining using antibodies against MHC Class II antigen and macrophage-associated antigens (CD68) as well as routine H&E and Masson's trichome stain. In patients with biliary atresia, the liver biopsy specimen was obtained at the time of Kasai portoenterostomy. Expression of HLA-DR antigens and CD68 antigens was either absent or minimal in normal liver biopsy specimens. There were a few HLA-DR antigens and a few CD68-positive cells around portal tracts in all patients with neonatal hepatitis and five of the seven biliary atresia patients with successful Kasai portoenterostomy. In contrast, there was strong expression of HLA-DR antigen in bile ductules, inflammatory cells, and adjacent damaged hepatocytes and marked CD68-positive macrophage infiltrate in the portal tracts as well as hepatic lobules in two patients with good prognosis and in all eight patients with bad prognosis. Hepatic expression of MHC Class II antigen and CD68 antigens correlated well with the severity of clinical course in patients with BA and may act as a prognostic factor in these patients.