Biliary atresia (BA) is notable for marked ductular reaction and rapid development of fibrosis. Activation of the Hedgehog (Hh) pathway promotes the expansion of populations of immature epithelial cells that coexpress mesenchymal markers and may be profibrogenic. We examined the hypothesis that in BA excessive Hh activation impedes ductular morphogenesis and enhances fibrogenesis by promoting accumulation of immature ductular cells with a mesenchymal phenotype. Livers and remnant extrahepatic ducts from BA patients were evaluated by quantitative reverse-transcription polymerase chain reaction (QRT-PCR) and immunostaining for Hh ligands, target genes, and markers of mesenchymal cells or ductular progenitors. Findings were compared to children with genetic cholestatic disease, age-matched deceased donor controls, and adult controls. Ductular cells isolated from adult rats with and without bile duct ligation were incubated with Hh ligand-enriched medium +/- Hh-neutralizing antibody to determine direct effects of Hh ligands on epithelial to mesenchymal transition (EMT) marker expression. Livers from pediatric controls showed greater innate Hh activation than adult controls. In children with BA, both intra- and extrahepatic ductular cells demonstrated striking up-regulation of Hh ligand production and increased expression of Hh target genes. Excessive accumulation of Hh-producing cells and Hh-responsive cells also occurred in other infantile cholestatic diseases. Further analysis of the BA samples demonstrated that immature ductular cells with a mesenchymal phenotype were Hh-responsive. Treating immature ductular cells with Hh ligand-enriched medium induced mesenchymal genes; neutralizing Hh ligands inhibited this. CONCLUSION: BA is characterized by excessive Hh pathway activity, which stimulates biliary EMT and may contribute to biliary dysmorphogenesis. Other cholestatic diseases show similar activation, suggesting that this is a common response to cholestatic injury in infancy.