Increasing evidence suggests that liver regeneration is suppressed in patients with chronic HCV infection; however, the underlying mechanisms remain unclear. Previously, we demonstrated that injection of the synthetic double-stranded RNA (dsRNA) poly I:C to mimic viral infection suppresses liver regeneration in the partial hepatectomy (PHx) model, whereby IFN-gamma contributes to the inhibition. In this study, we examined the role of the IFN-gamma-activated downstream signal (STAT1) and genes (IRF-1, p21(cip1), and SOCS1) in liver regeneration and hepatocyte proliferation. Results show that disruption of the STAT1 gene abolished poly I:C suppression of liver regeneration and the inhibitory effect of poly I:C on liver regeneration was diminished in IRF-1(-/-) and p21(cip1-/-)mice. Treatment with IFN-gamma in vitro inhibited cell proliferation of wild-type mouse hepatocytes, but not STAT1(-/-) hepatocytes. The inhibitory effect of IFN-gamma on cell proliferation was also diminished in IRF-1(-/-) and p21(cip1-/-) hepatocytes, but enhanced in SOCS1(-/-) hepatocytes. Hepatocyte proliferation was unaffected by treatment with poly I:C alone, but when hepatocytes were co-cultured with liver lymphocytes, proliferation was inhibited by IFN-gamma/STAT1-dependent mechanisms. Moreover, in HCV-infected livers with cirrhosis, activation of STAT1 was detected and correlated positively with liver injury (elevated serum levels of AST) but negatively with hepatocyte proliferation (hepatocyte PCNA and Ki-67 positive immunostaining). In conclusion, STAT1 is involved in dsRNA suppression of liver regeneration; not only does STAT1 activation contribute to liver injury, it may also block liver repair through inhibition of hepatocyte proliferation in HCV-infected patients, playing an important role in the pathogenesis of disease.