Transgenic mouse lineages were established that carry the normal (M) or mutant (Z) alleles of the human alpha 1-antitrypsin (alpha 1-Pi) gene. All of the alpha 1-Pi transgenic mice expressed the human protein in the liver, cartilage, gut, kidneys, lymphoid macrophages, and thymus. The human M-allele protein was secreted normally into the serum. However, the human Z-allele protein accumulated in several cell types, but particularly in hepatocytes, and was found in serum in tenfold lower concentrations than the M-allele protein. Mice in one lineage carrying the mutant Z allele expressed high levels of human alpha 1-Pi RNA and displayed significant runting (50% of normal weight) in the neonatal period. This lineage was found to have alpha 1-Pi-induced liver pathology in the neonatal period, concomitant with the accumulation of human Z protein in diastase-resistant cytoplasmic globules that could be revealed in the Periodic acid-Schiff reaction (PAS). The phenotype of mice in the strain expressing high levels of the Z allele is remarkably similar to human neonatal hepatitis, and this strain may prove to be a useful animal model for studying this disease.