Hepatic oval cell activation, proliferation, and differentiation has been observed under certain physiological conditions, mainly when the proliferation of existing hepatocytes has been inhibited followed by severe hepatic injury. Hepatic oval cells display a distinct phenotype and have been shown to be a bipotential progenitor of two types of epithelial cells found in the liver, hepatocytes and bile ductular cells. Bone marrow stem cells have recently been shown to be a potential source of the hepatic oval cells and that reconstitution of an injured liver from a purified stem cell population is possible. The focus of this review is on the studies involving the activation, proliferation, and differentiation of these hepatic oval cells and the role that they play in regeneration of the damaged liver. In order to present the potentiality of the hepatic oval cell, an experimental model that involves the inhibition of normal hepatic growth and division as well as severe hepatic injury via chemical or surgical means has been employed. In this model, an as yet undetermined signal or perhaps the lack of regenerative capability in the hepatocytes activates the hepatic oval cell compartment. However, other than understanding a potential origin of these cells and some of the markers that characterize them, it still remains unclear as to how these cells migrate ('home') into the damaged areas and how they begin their differentiation into mature and functioning hepatic cells.