The alcohol‐inducible cytochrome P450 2E1 (CYP2E1) is expressed mainly in hepatocytes and generates reactive oxygen species (ROS). To better understand how hepatic stellate cells (HSC) become activated in the presence of oxidative stress and evaluate whether CYP2E1‐derived ROS activate stellate cells, we coincubated primary stellate cells with HepG2 cells, which do (E47 cells) or do not (C34 cells) express CYP2E1. Morphologic changes and loss of lipid droplets were more apparent in the stellate cells cocultured with E47 cells. There was a more pronounced increase in α‐smooth muscle actin (α‐sma), intracellular and secreted collagen type I protein, and intra‐ and extracellular H₂O₂ and lipid peroxidation products in stellate cells coincubated with E47 cells. Expression of collagen in stellate cells did not change when cocultured with HepG2 cells expressing a different P450, CYP3A4. Stellate cells cultured on Matrigel expressed increased α‐sma and collagen when incubated with E47 cells. The increase in collagen production by coculture with E47 cells was prevented by antioxidants, by CYP2E1 inhibitors, and by transfected antisense CYP2E1. The addition of arachidonic acid plus ferric nitrilotriacetate (Fe‐NTA), agents that potentiate oxidative stress, further induced collagen protein in the E47 coculture. Stellate cell proliferation was greater in the E47 coculture, and this was partially abrogated by catalase and vitamin E. These results show that hepatocytes containing CYP2E1 release diffusible mediators including ROS, which can activate HSC. Thus, besides perturbing the homeostasis of hepatocytes, CYP2E1‐derived diffusible oxidants may also interact with stellate cells and contribute to hepatic fibrosis.