BACKGROUND & AIMS: The Rho small guanosine triphosphatase Cdc42 is critical for diverse cellular functions, including regulation of actin organization, cell polarity, intracellular membrane trafficking, transcription, cell-cycle progression, and cell transformation. This implies that Cdc42 might be required for liver function. METHODS: Mice in which Cdc42 was ablated in hepatocytes and bile duct cells were generated by Cre-loxP technology. Livers were examined by histologic, immunohistochemical, ultrastructural, and serum analysis to define the effect of loss of Cdc42 on liver structure. RESULTS: Mice lacking Cdc42 in their hepatocytes were born at Mendelian ratios. They did not show increased mortality but showed chronic jaundice. They developed hepatomegaly soon after birth, and signs of liver transformation, such as formation of nodules and tumors, became visible macroscopically at age 6 months. Hepatocellular carcinoma was observed 8 months after birth. Tumors grew slowly and lacked expression of nuclear beta-catenin. Lung metastases were observed at the late stage of carcinogenesis. Immunofluorescent examination and electron microscopy revealed severe defects in the liver. At the age of 2 months, the canaliculi between hepatocytes were greatly enlarged, although the tight junctions flanking the canaliculi appeared normal. Regular liver plates were absent. E-cadherin expression pattern and gap junction localization were distorted. Analysis of serum samples indicated cholestasis. CONCLUSIONS: We describe a mouse model in which chronic liver disease leads to hepatocarcinogenesis.