The liver has the unique ability to regenerate after loss of mass and function such as following surgical resection or toxic liver injury. Gene targeting has identified factors crucial to liver development and regeneration. Regeneration occurs through growth-factor- and cytokine-mediated proliferation of differentiated hepatocytes, and extracellular proteases are now recognized to process these molecules. Proteases release cytokines and growth factors that are anchored to the hepatic extracellular matrix or require processing for their bioactivity. Crucial 'start and stop' signals for liver regeneration are regulated by serine proteases and metalloproteases that provide an interface between proteolytic cascades and intracellular signaling during hepatocyte division.