The development and differentiation of bile ducts in the human and rodent liver are reviewed. The liver primordium develops as a ventral diverticulum in the anterior intestinal portal region, which consists of endodermal and mesodermal components. The endodermal cells differentiate into hepatocytes and all epithelial cells of the bile ducts in the adult liver. The gallbladder and extrahepatic bile ducts also start to develop from hepatic endodermal cells and hepatoblasts just after liver primordium formation. The gallbladder and cystic duct do not develop through hepatic development in the rat. Intrahepatic bile ducts are formed from periportal hepatoblasts forming the “ductal plate” and expressing alpha‐fetoprotein, and albumin and bile duct‐specific cytokeratin and develop independently of extrahepatic bile duct formation. The first sign of intrahepatic bile duct differentiation is the increased expression of bile duct–specific cytokeratin and large lumina formation in periportal hepatoblasts, and then deposition of basal laminar components occurs on the basal side. Their development takes place discontinuously along portal veins at the early stage of development, and they then become confluent through development. Periportal connective tissue, glucocorticoid hormones, and basal laminar components may play important roles in the differentiation of bile ducts. Microsc. Res. Tech. 39:328–335, 1997. © 1997 Wiley‐Liss, Inc.