To investigate the hypothesis that during the development of biliary atresia, early changes in hepatobiliary transport are mainly related to the inflammatory process and lead to intrahepatic cholestasis and subsequent liver injury, livers from mice with rhesus rotavirus-induced biliary atresia were analyzed for mRNA expression of hepatobiliary transporters, nuclear receptors, and inflammatory cytokines. Seven days after inoculation, despite high bile acid concentrations in the liver, gene expression of canalicular and basolateral hepatobiliary transporters and their regulatory nuclear receptors was down-regulated with concomitant increase in gene expression of inflammatory cytokines and rise in serum unconjugated bilirubin. At 14 d, hepatobiliary transporters and nuclear receptors remained down-regulated although the inflammatory response subsided. The percentage of conjugated bilirubin started to increase as extrahepatic biliary obstruction occurred. At 18 d, expression of hepatobiliary transporters remained low, expression of nuclear receptors returned to normal, while expression of inflammatory cytokines decreased further. Moreover, histology demonstrated progressive inflammation, bile duct damage, ductular proliferation, and hepatocyte necrosis. In conclusion, intrahepatic cholestasis due to inflammation-related down-regulation of basolateral and canalicular hepatobiliary transporters is an early event in the development of biliary atresia. Intrahepatic cholestasis contributes to the development of jaundice and liver injury.