The forkhead box proteins A1 and A2 (Foxa1 and Foxa2) are transcription factors with critical roles in establishing the developmental competence of the foregut endoderm and in initiating liver specification. Using conditional gene ablation during a later phase of liver development, we show here that deletion of both Foxa1 and Foxa2 (Foxa1/2) in the embryonic liver caused hyperplasia of the biliary tree. Abnormal bile duct formation in Foxa1/2-deficient liver was due, at least in part, to activation of IL-6 expression, a proliferative signal for cholangiocytes. The glucocorticoid receptor is a negative regulator of IL-6 transcription; in the absence of Foxa1/2, the glucocorticoid receptor failed to bind to the IL-6 promoter, causing enhanced IL-6 expression. Thus, after liver specification, Foxa1/2 are required for normal bile duct development through prevention of excess cholangiocyte proliferation. Our data suggest that Foxa1/2 function as terminators of bile duct expansion in the adult liver through inhibition of IL-6 expression.