BACKGROUND & AIM: Chronic liver diseases are characterized by expansion of the small immature cholangiocytes - a mechanism named ductular reaction (DR) - which have the capacity to differentiate into hepatocytes. We investigated the kinetics of this differentiation, as well as analyzing several important features of the newly formed hepatocytes, such as functional maturity, clonal expansion and resistance to stress in mice with long-term liver damage. METHODS: We tracked cholangiocytes using osteopontin-iCreERT2 and hepatocytes with AAV8-TBG-Cre. Mice received carbon tetrachloride (CCl4) for >24 weeks to induce chronic liver injury. Livers were collected for the analysis of reporter proteins, cell proliferation and death, DNA damage, and nuclear ploidy; hepatocytes were also isolated for RNA sequencing. RESULTS: During liver injury we observed a transient DR and the differentiation of DR cells into hepatocytes as clones that expanded to occupy 12% of the liver parenchyma by week 8. By lineage tracing, we confirmed that these new hepatocytes derived from cholangiocytes but not from native hepatocytes. They had all the features of mature functional hepatocytes. In contrast to the exhausted native hepatocytes, these newly formed hepatocytes had higher proliferative capability, less apoptosis, a lower proportion of highly polyploid nuclei and were better at eliminating DNA damage. CONCLUSIONS: In chronic liver injury, DR cells differentiate into stress-resistant hepatocytes that repopulate the liver. The process might account for the observed parenchymal reconstitution in livers of patients with advanced-stage hepatitis and could be a target for regenerative purposes. LAY SUMMARY: During chronic liver disease, while native hepatocytes are exhausted and genetically unstable, a subset of cholangiocytes clonally expand to differentiate into young, functional and robust hepatocytes. This cholangiocyte cell population is a promising target for regenerative therapies in patients with chronic liver insufficiency.