Biliary atresia, a progressive sclerosis of the extrahepatic biliary tree that occurs only within the first 3 months of life, is one of the most common causes of neonatal cholestasis and accounts for over half of children who undergo liver transplantation. In biliary atresia, a number of prenatal or perinatal insults to the biliary tree appear to culminate in complete obliteration of the lumen of the extrahepatic biliary tree and continued injury and sclerosis of intrahepatic bile ducts, even after portoenterostomy is successful. A minority of cases of biliary atresia may be caused by defects in morphogenesis of the bile ducts. Potential etiologies for the more common perinatal form of biliary atresia include viral infections, immune-mediated bile duct injury, and autoimmune disease involving the bile ducts. Two viruses, reovirus and rotavirus, have received increasing attention as possible inciters of an immune-mediated injury to the biliary tree. Fas ligand upregulation and apoptosis of bile duct epithelia have been demonstrated in human specimens, as well as T-lymphocyte and macrophage activation in portal tracts. An experimental model using rotavirus infection in newborn mice has been useful in characterizing the mechanisms underlying bile duct injury. It is proposed that virally induced neoantigens displayed on biliary epithelium may play a role in initiating the immune processes involved in destruction of the extrahepatic bile duct and ongoing intrahepatic ductal injury in the perinatal form of biliary atresia. The short window of time after birth during which this disease presents suggests that immaturity of the neonatal immune system and genetic susceptibility also may be key factors. Delineation of the mechanisms underlying bile duct injury will be essential to the development of new potential therapies for this important pediatric disorder.