Capicua (CIC) has been implicated in pathogenesis of spinocerebellar ataxia type 1 and cancer in mammals; however, the in vivo physiological functions of CIC remain largely unknown. Here we show that Cic hypomorphic (Cic-L(-/-)) mice have impaired bile acid (BA) homeostasis associated with induction of proinflammatory cytokines. We discovered that several drug metabolism and BA transporter genes were down-regulated in Cic-L(-/-) liver, and that BA was increased in the liver and serum whereas bile was decreased within the gallbladder of Cic-L(-/-) mice. We also found that levels of proinflammatory cytokine genes were up-regulated in Cic-L(-/-) liver. Consistent with this finding, levels of hepatic transcriptional regulators, such as hepatic nuclear factor 1 alpha (HNF1α), CCAAT/enhancer-binding protein beta (C/EBPβ), forkhead box protein A2 (FOXA2), and retinoid X receptor alpha (RXRα), were markedly decreased in Cic-L(-/-) mice. Moreover, induction of tumor necrosis factor alpha (Tnfα) expression and decrease in the levels of FOXA2, C/EBPβ, and RXRα were found in Cic-L(-/-) liver before BA was accumulated, suggesting that inflammation might be the cause for the cholestasis in Cic-L(-/-) mice. Our findings indicate that CIC is a critical regulator of BA homeostasis, and that its dysfunction might be associated with chronic liver disease and metabolic disorders.