Background & AimsDevelopmental morphogens play an important role in coordinating the ductular reaction and portal fibrosis occurring in the setting of cholangiopathies. However, little is known about how membrane signaling events in ductular reactive cells (DRCs) are transduced into nuclear transcriptional changes to drive cholangiocyte maturation and matrix deposition. Therefore, the aim of this study was to investigate potential mechanistic links between cell signaling events and epigenetic regulators in DRCs.MethodsUsing directed differentiation of induced pluripotent stem cells (iPSC), isolated DRCs, and in vivo models, we examine the mechanisms whereby sonic hedgehog (Shh) overcomes an epigenetic barrier in biliary precursors and promotes both cholangiocyte maturation and deposition of fibronectin (FN).ResultsWe demonstrate, for the first time, that Gli1 influences the differentiation state and fibrogenic capacity of iPSC-derived hepatic progenitors and isolated DRCs. We outline a novel pathway wherein Shh-mediated Gli1 binding in key cholangiocyte gene promoters overcomes an epigenetic barrier conferred by the polycomb protein, enhancer of zeste homolog 2 (EZH2) and initiates the transcriptional program of cholangiocyte maturation. We also define previously unknown functional Gli1 binding sites in the promoters of cytokeratin (CK)7, CK19, and FN. Our in vivo results show that EZH2 KO mice fed the choline-deficient, ethanolamine supplemented (CDE) diet have an exaggerated cholangiocyte expansion associated with more robust ductular reaction and increased peri-portal fibrosis.ConclusionWe conclude that Shh/Gli1 signaling plays an integral role in cholangiocyte maturation in vitro by overcoming an EZH2-dependent epigenetic barrier and this mechanism also promotes biliary expansion in vivo.