An important role for β-catenin in regulating p65 (a subunit of NF-κB) during acute liver injury has recently been elucidated through use of conditional β-catenin knockout mice, which show protection from apoptosis through increased activation of p65. Thus, we hypothesized that the p65/β-catenin complex may play a role in regulating processes such as cell proliferation during liver regeneration. We show through in vitro and in vivo studies that the p65/β-catenin complex is regulated through the TNF-α pathway and not through Wnt signaling. However, this complex is unchanged after partial hepatectomy (PH), despite increased p65 and β-catenin nuclear translocation as well as cyclin D1 activation. We demonstrate through both in vitro silencing experiments and chromatin immunoprecipitation after PH that β-catenin, and not p65, regulates cyclin D1 expression. Conversely, using reporter mice we show p65 is activated exclusively in the nonparenchymal (NPC) compartment during liver regeneration. Furthermore, stimulation of macrophages by TNF-α induces activation of NF-κB and subsequent secretion of Wnts essential for β-catenin activation in hepatocytes. Thus, we show that β-catenin and p65 are activated in separate cellular compartments during liver regeneration, with p65 activity in NPCs contributing to the activation of hepatocyte β-catenin, cyclin D1 expression, and subsequent proliferation.