Hepatic stellate cells (HSCs) and portal fibroblasts (PFs) are believed to be the major source of myofibroblasts that participate in fibrogenesis by way of synthesis of proinflammatory cytokines and extracellular matrices. Previous lineage tracing studies using MesP1^Cre and Rosa26lacZ^flox mice demonstrated that MesP1+ mesoderm gives rise to mesothelial cells (MCs), which differentiate into HSCs and PFs during liver development. In contrast, several in vivo and in vitro studies reported that HSCs can differentiate into other cell types, including hepatocytes, cholangiocytes, and progenitor cell types known as oval cells, thereby acting as stem cells in the liver. To test whether HSCs give rise to epithelial cells in adult liver, we determined the hepatic lineages of HSCs and PFs using MesP1^Cre and Rosa26mTmG^flox mice. Genetic cell lineage tracing revealed that the MesP1+ mesoderm gives rise to MCs, HSCs, and PFs, but not to hepatocytes or cholangiocytes, in the adult liver. Upon carbon tetrachloride injection or bile duct ligation surgery‐mediated liver injury, mesodermal mesenchymal cells, including HSCs and PFs, differentiate into myofibroblasts but not into hepatocytes or cholangiocytes. Furthermore, differentiation of the mesodermal mesenchymal cells into oval cells was not observed. These results indicate that HSCs are not sufficiently multipotent to produce hepatocytes, cholangiocytes, or oval cells by way of mesenchymal‐epithelial transition in vivo. Conclusion: Cell lineage tracing demonstrated that mesodermal mesenchymal cells including HSCs are the major source of myofibroblasts but do not differentiate into epithelial cell types such as hepatocytes, cholangiocytes, and oval cells. (Hepatology 2014;60:311–322)