Retinoid-storing hepatic stellate cells (HSCs) have recently been described as a liver-resident mesenchymal stem cell (MSC) population; however, it is not clear whether these cells contribute to liver regeneration or serve as a progenitor cell population with hepatobiliary characteristics. Here, we purified HSCs with retinoid-dependent fluorescence-activated cell sorting from eGFP-expressing rats and transplanted these GFP(+) HSCs into wild-type (WT) rats that had undergone partial hepatectomy in the presence of 2-acetylaminofluorene (2AAF) or retrorsine, both of which are injury models that favor stem cell-based liver repair. Transplanted HSCs contributed to liver regeneration in host animals by forming mesenchymal tissue, progenitor cells, hepatocytes, and cholangiocytes and elevated direct bilirubin levels in blood sera of GUNN rats, indicating recovery from the hepatic bilirubin-handling defect in these animals. Transplanted HSCs engrafted within the bone marrow (BM) of host animals, and HSC-derived cells were isolated from BM and successfully retransplanted into new hosts with injured liver. Cultured HSCs transiently adopted an expression profile similar to that of progenitor cells during differentiation into bile acid-synthesizing and -transporting hepatocytes, suggesting that stellate cells represent a source of liver progenitor cells. This concept connects seemingly contradictory studies that favor either progenitor cells or MSCs as important players in stem cell-based liver regeneration.