Background & Aims: Mutations in Jagged1, a Notch Iigand, cause Alagille syndrome (AGS), a disorder characterized by a paucity of intrahepatic bile ducts (IHBD). The mechanism underlying the contribution of the Notch signaling pathway to IHBD formation, however, remains unknown. Here we investigated the role of Notch signaling in IHBD development. Methods: The expression patterns of Jagged1, Notch2, and Hes1 during mouse liver development were analyzed by semiquantitative reverse-transcription polymerase chain reaction (PT-PCR), immunoblot, and immunohistochemistry. The hepatocyte maturation level and IHBD development were studied in Hes1 null mice in comparison with wild-type mice. The effect of Jagged:1 on biliary differentiation was assessed by using an in vitro 2-cell coculture system with WB-F344 cells, a cell line derived from normal adult rat liver. Results: Jagged:1 was expressed in the portal mesenchyme during the neonatal period. During the same period, Notch2 and Hes1 expression was observed in the biliary epithelial cells adjacent to the Jagged1-positive cells. During ductal plate remodeling, Notch2 and Hes1 were up-regulated exclusively in the biliary epithelial cells that form tubular structures. In contrast, the tubular formation of IHBD was completely absent in Hes1 null mice. Coculture with BaIb3T3 cells stably overexpressing Jagged1 induced transactivation of the Hes1 promoter and increased expression of biliary lineage markers, such as cytokeratin-19 and gamma-glutamyl transpeptidase, in WB-F344 cells. Conclusions: Our results suggest that Notch signaling has an important role in the differentiation of biliary epithelial cells and is essential for their tubular formation during IHBD development.