Excessive activation of hepatic stellate cells (HSCs) is a key step in liver fibrogenesis. Here we report that CUG-binding protein 1 (CUGBP1) expression is elevated in HSCs and positively correlates with liver fibrosis severity in human liver biopsies. Transforming growth factor-beta (TGF-β) selectively increases CUGBP1 expression in cultured HSCs in a p38 mitogen-activated protein kinase (MAPK)-dependent manner. Knockdown of CUGBP1 inhibits alpha smooth muscle actin (α-SMA) expression and promotes interferon gamma (IFN-γ) production in HSCs in vitro. We further show that CUGBP1 specifically binds to the 3' untranslated region (UTR) of human IFN-γ mRNA and promotes its decay. In mice, knockdown of CUGBP1 alleviates, whereas its overexpression exacerbates, bile duct ligation (BDL)-induced hepatic fibrosis. Therefore, CUGBP1-mediated IFN-γ mRNA decay is a key event for profibrotic TGF-β-dependent activation of HSCs, and inhibiting CUGBP1 to promote IFN-γ signalling in activated HSCs could be a novel strategy to treat liver fibrosis.