1. The application of primary cultures of hepatocytes in testing for hepatotoxicity of drugs is reviewed. 2. Hepatotoxicity results principally from the biotransformation of toxic agents. This process is very complex and specific and involves a powerful system of multigenic isozyme families for both phase I and phase II drug metabolizing reactions. Many of the isozymes are specifically expressed in the liver in relation to the maturation or differentiation state, and are specifically induced, possibly through a complex temporally programmed gene regulation. 3. This highly specific, coordinated, molecular regulation is difficult to maintain in vitro. Isolation of hepatocytes induces a prompt differential decline of liver-specific gene transcription, which leads to preferential loss of the most specific functions, including those of the drug metabolizing isozymes, whereas repair of cell damage remains active. 4. The use of serum-free, hormonally defined media stabilizes specific hepatic functions, but not transcriptional activity, for 4-5 days. Defined media retain active DNA replication but do not permit clonal growth of hepatocytes. Co-culturing hepatocytes with primitive biliary cells prolongs cell survival and their functional capacities for several weeks, including some of the transcriptional activity.