Connective tissue growth factor (CTGF) is important for transforming growth factor‐β (TGF‐β)–induced liver fibrogenesis. Hepatic stellate cells have been recognized as its major cellular source in the liver. Here we demonstrate the induction of CTGF expression in hepatocytes of damaged livers and identify a molecular mechanism responsible for it. CTGF expression was found by immunohistochemistry in bile duct epithelial cells, hepatic stellate cells, and hepatocytes in fibrotic liver tissue from patients with chronic hepatitis B infection. Similarly, CTGF expression was induced in hepatocytes of carbon tetrachloride–treated mice. CTGF expression and secretion were detected spontaneously in a medium of hepatocytes after 3 days of culture, which was enhanced by stimulation with TGF‐β. TGF‐β–induced CTGF expression was mediated through the activin receptor–like kinase 5 (ALK5)/Smad3 pathway, whereas activin receptor–like kinase 1 activation antagonized this effect. CTGF expression in the liver tissue of TGF‐β transgenic mice correlated with serum TGF‐β levels. Smad7 overexpression in cultured hepatocytes abrogated TGF‐β–dependent and intrinsic CTGF expression, indicating that TGF‐β signaling was required. In line with these data, hepatocyte‐specific transgenic Smad7 reduced CTGF expression in carbon tetrachloride–treated animals, whereas in Smad7 knockout mice, it was enhanced. Furthermore, an interferon gamma treatment of patients with chronic hepatitis B virus infection induced Smad7 expression in hepatocytes, leading to decreased CTGF expression and fibrogenesis. Conclusion: Our data provide evidence for the profibrogenic activity of TGF‐β directed to hepatocytes and mediated via the up‐regulation of CTGF. We identify ALK5‐dependent Smad3 signaling as the responsible pathway inducing CTGF expression, which can be hindered by an activated activin receptor–like kinase 1 pathway and completely inhibited by TGF‐β antagonist Smad7. (HEPATOLOGY 2007.)