We previously showed that mature hepatocytes could transdifferentiate into bile ductular cells when placed in a collagen-rich microenvironment. To explore the mechanism of transdifferentiation, we examined whether inflammatory cytokines affected the phenotype of hepatocytes in a three-dimensional culture system. Spheroidal aggregates of rat hepatocytes were embedded within a type I collagen gel matrix and cultured in the presence of various cytokines. In the control, hepatocytes gradually lost expression of albumin, tyrosine aminotransferase, and hepatocyte nuclear factor (HNF)-4α, while aberrantly expressed bile ductular markers, including cytokeratin 19 (CK 19) and spermatogenic immunoglobulin superfamily (SgIGSF). Among the cytokines examined, tumor necrosis factor (TNF)-α inhibited expression of albumin and HNF-4α, both at mRNA and protein levels. After culturing for 2 weeks with TNF-α, hepatocytic spheroids were transformed into extensively branching tubular structures composed of CK 19- and SgIGSF-positive small cuboidal cells. These cells responded to secretin with an increase in secretion and expressed functional bile duct markers. TNF-α also induced the phosphorylation of Jun N-terminal kinase (JNK) and c-Jun, and the morphogenesis was inhibited by SP600125, a specific JNK inhibitor. Furthermore, in chronic rat liver injury induced by CCl(4) , ductular reaction in the centrilobular area demonstrated strong nuclear staining of phosphorylated c-Jun. Our results demonstrate that TNF-α promotes the ductular transdifferentiation of hepatocytes and suggest a role of TNF-α in the pathogenesis of ductular reaction.