We have devised a medium which supports the continuous growth of hepatocytes without losing their replicative potential and differentiation capacity for a longer period. The medium HCGM, contains four key substances in addition to foetal bovine serum. They are epidermal growth factor, nicotinamide, ascorbic acid 2-phosphate and dimethylsulphoxide. When a non-parenchymal cell fraction containing small hepatocytes and non-parenchymal cells was cultured in HCGM, small hepatocytes grew clonally and differentiated into cells expressing either mature hepatocyte marker proteins or biliary cell marker proteins. Thus, for the first time, we showed the presence of a small compartment of bipotent and highly replicative clonogenic hepatocytes in the rat adult liver. HCGM also supported the growth of stellate cells (Ito cells) which were in the original preparation, suggesting the important role of stellate cells for the successful cultivation of hepatocytes. Together, these results suggest that a microenvironment is produced as a result of cooperative interactions between hepatocytes and stellate cells: one which stimulates the growth and differentiation of clonogenic hepatocytes.