We report the generation of human ESC-derived, expandable hepatic organoids (hEHOs) using our newly established method with wholly defined (serum-free, feeder free) media. The hEHOs stably maintain phenotypic features of bipotential liver stem/progenitor cells that can differentiate into functional hepatocytes or cholangiocytes. The hEHOs can expand for 20 passages enabling large scale expansion to cell numbers requisite for industry or clinical programs. The cells from hEHOs display remarkable repopulation capacity in injured livers of FRG mice following transplantation, and they differentiate in vivo into mature hepatocytes. If implanted into the epididymal fat pads of immune-deficient mice, they do not generate non-hepatic lineages and have no tendency to form teratomas. We further develop a derivative model by incorporating human fetal liver mesenchymal cells (hFLMCs) into the hEHOs, referred to as hFLMC/hEHO, which can model alcoholic liver disease-associated pathophysiologic changes, including oxidative stress generation, steatosis, inflammatory mediators release and fibrosis, under ethanol treatment. Our work demonstrates that the hEHOs have considerable potential to be a novel, ex vivo pathophysiological model for studying alcoholic liver disease as well as a promising cellular source for treating human liver diseases.