Long-term primary cultures were established from fetal or neonatal livers by using cell suspensions depleted of red blood cells and by culturing the cells in hormonally defined medium containing dimethyl sulfoxide. Two distinct populations of hepatic progenitor cells were evident in the cultures, based on morphology, proliferative ability, and liver-specific gene expression. Most colonies consisted of immature hepatic progenitors: small, blastlike cells, weakly expressing cr-fetoprotein, albumin, and gamma-glutamyltranspeptidase, and showing evidence of proliferation as measured by bromodeoxyuridine incorporation. At the perimeter of these colonies of immature cells and forming some colonies by themselves were more mature hepatic progenitor cells: larger cells, with increased cytoplasmic to nuclear ratios, little proliferation, and strongly expressing albumin, cr-fetoprotein, and gamma-glutamyltranspeptidase. The latter two proteins were localized to the bile canalicular membranes of these cells. Glycogen deposits were present in the mature cells from day 14 embryos after eight days of culture. Thus, DMSO treatment of hepatic parenchymal progenitors provides a novel system for studies of liver development.