The interdependence of both transport and metabolism on the disposition of drugs has recently gained heightened attention in the literature, and has been termed the "interplay of transport and metabolism". Such "interplay" is observed when inhibition of biliary clearance of a drug results in an "apparent" increase in the metabolic clearance of the drug or vice versa. In this manuscript, we derived and explored through simulations a physiological-based pharmacokinetic model that integrates both transport and metabolism and explains the "apparent" dependence of hepatic clearance on both these processes. In addition, we show that the phenomenon of hepatic "transport-metabolism interplay" is a result of using the plasma concentration as a point of reference when calculating metabolic or biliary clearance, and this interplay is maximal when the drug is actively transported into the hepatocytes (i.e., hepatocyte sinusoidal influx clearance is greater than the sinusoidal efflux clearance). When the hepatic drug concentration is used as a reference point to calculate metabolic or biliary clearance, this interplay ceases to exist. A mechanistic understanding of this interplay phenomenon can be used to explain the somewhat paradoxical results that may be observed in drug-drug interaction studies when a drug is cleared by both metabolism and biliary excretion. That is, when one of these two pathways is inhibited, the other pathway appears to be induced or activated. This interplay results in an increase in hepatic drug concentrations and therefore has implications for the hepatic efficacy and toxicity of a drug.