Studies have suggested the reversibility of liver fibrosis, but the mechanisms of fibrosis reversal are poorly understood. We investigated the possible functional link between apoptosis, macrophages, and matrix turnover in rat liver during reversal of fibrosis secondary to bile duct ligation (BDL). Biliary fibrosis was induced by BDL for 4 wk. After Roux-en-Y (RY)-bilio-jejunal-anastomosis, resolution of fibrosis was monitored for up to 12 wk by hepatic collagen content, matrix metalloproteinase (MMP) expression and activities, and fibrosis-related gene expression. MMP expression and activities were studied in macrophages after engulfment of apoptotic cholangiocytes in vitro. Hepatic collagen decreased to near normal at 12 wk after RY-anastomosis. During reversal, profibrogenic mRNA declined, whereas expression of several profibrolytic MMPs increased. Fibrotic septa showed fragmentation at week 4 and disappeared at week 12. Peak histological remodeling at week 4 was characterized by massive apoptosis of cytokeratin 19+ cholangiocytes, >90% in colocalization with CD68+ macrophages, and a 2- to 7.5-fold increase in matrix-degrading activities. In vitro, phagocytosis of apoptotic cholangiocytes induced matrix-degrading activities and MMP-3, -8, and -9 in rat peritoneal macrophages. We concluded that reconstruction of bile flow after BDL leads to an orchestrated fibrolytic program that results in near complete reversal of advanced fibrosis. The peak of connective tissue remodeling and fibrolytic activity is associated with massive apoptosis of cholangiocytes and their phagocytic clearance by macrophages in vivo. Macrophages upregulate MMPs and become fibrolytic effector cells upon apoptotic cholangiocyte engulfment in vitro, suggesting that phagocytosis-associated MMP induction in macrophages significantly contributes to biliary fibrosis reversal.