Cystic fibrosis (CF) is a major genetic disease in Caucasians affecting 1 in 2500 newborns. Hepatobiliary pathology is a major cause of morbidity and mortality in CF second only to pulmonary disease. SULT1E1 activity is significantly elevated, generally 20-30-fold, in hepatocytes of mouse models of CF. SULT1E1 is responsible for the inactivation of beta-estradiol (E2) at physiological concentrations via conjugation with sulfonate. The increase in SULT1E1 activity results in the alteration of E2-regulated protein expression in CF mouse liver. To investigate the mechanism by which the absence of CFTR in human cholangiocytes induces SULT1E1 expression in hepatocytes, a membrane-separated human MMNK-1 cholangiocyte and human HepG2 hepatocyte co-culture system was developed. The cystic fibrosis transmembrane conductance regulator (CFTR) is expressed in bile duct cholangiocytes but not hepatocytes, whereas SULT1E1 is expressed in hepatocytes but not cholangiocytes. CFTR expression in MMNK-1 cells was inhibited with siRNA by >90% as determined by immunoblot and immunohistochemical analysis. Control and CFTR-siRNA-MMNK-1 cells were co-cultured with HepG2 cells in a Transwell membrane-separated system. After 8h of co-culture, HepG2 cells were removed from exposure to MMNK-1 cells and placed in fresh medium. After 24-48h, expression of SULT1E1 and selected E2-regulated proteins was analyzed in the HepG2 cells. Results demonstrated that SULT1E1 message and activity were selectively induced in HepG2 cells co-cultured with CFTR-deficient MMNK-1 cells. The expression of E2-regulated proteins (IGF-1, GST-P1 and carbonic anhydrase II) was also altered in response to decreased E2 levels. Thus, the loss of CFTR activity in cholangiocytes stimulates the expression of SULT1E1 in hepatocytes by a paracrine mechanism. SULT1E1 expression in HepG2 cells is inducible by sterol mediated liver-X-receptor (LXR) activation although not by progestins that induce SULT1E1 in the endometrium. SULT1E1 induction in the human cholangiocyte/hepatocyte co-culture system is consistent with and supports the results observed in CF mice. The changes in hepatocyte gene expression affect liver biochemistry and may facilitate the development of CF liver disease.