The outcome of liver injury is determined by the success of repair. Liver repair involves replacement of damaged liver tissue with healthy liver epithelial cells (including both hepatocytes and cholangiocytes), and reconstruction of normal liver structure and function. Current dogma posits that replication of surviving mature hepatocytes and cholangiocytes drives the regeneration of liver epithelium after injury, while failure of liver repair commonly leads to fibrosis, a scaring condition in which hepatic stellate cells, the main liver-resident mesenchymal cells, play the major role. The current review discusses other mechanisms that might be responsible for the regeneration of new liver epithelial cells and outgrowth of matrix-producing mesenchymal cells during hepatic injury. This theory proposes that during liver injury, some epithelial cells undergo epithelial-to-mesenchymal transition (EMT), acquire myofibroblastic phenotypes/features and contribute to fibrogenesis, while certain mesenchymal cells (namely hepatic stellate cells and stellate cell-derived myofibroblasts) undergo mesenchymal-to-epithelial transition (MET), revert to epithelial cells, and ultimately differentiate into either hepatocytes or cholangiocytes. Although this theory is highly controversial, it suggests that the balance between EMT and MET modulates the outcome of liver injury. This review summarizes recent advances that support or refute the concept that certain types of liver cells are capable of phenotype transition (i.e. EMT and MET) during both culture conditions and chronic liver injury.