Hepatic stem cells have an ability of self-renewal and can differentiate into a wide range of cell types including hepatocytes, bile epithelial cells, pancreatic cells and intestinal epithelial cells under various conditions. There are many factors such as microenvironment, cytokines and extracellular matrix that control hepatic stem cell differentiation. Differentiation of hepatic stem cells into hepatocytes is regulated by transcription factors and signal pathways, and hepatocellular carcinoma may result from the abnormal differentiation of hepatic stem cells. The plasticity, multi-potential differentiation, the mechanisms governing hepatic stem cell differentiation, and the relationship between hepatocellular carcinoma and the differentiation of hepatic stem cells are discussed.