The liver has a large regenerative capacity in response to injury. However, in severe cases of liver injury, its regenerative capacity may prove insufficent and the liver injury may progress to liver failure, and in such situations liver transplantation is the only treatment option. An alternative, less invasive approach may be transplantation of hepatocytes or hepatocyte precursor cells. In the adult liver two candidate progenitor cells have been identified: oval cells and small hepatocytes. The former are induced by liver injury under conditions preventing cell division of mature hepatocytes, while the latter are present in small numbers in normal liver. Both cell types have the capacity to expand and differentiate into hepatocytes. In recent years evidence has been presented that bone-marrow derived stem cells can also be expanded and differentiated into hepatocyte progenitor cells. Such cells may be a source for hepatocyte transplantation and hence have the potential to offer a novel therapy for liver failure.