Hematopoietic stem cells can directly transdifferentiate into hepatocytes because of cellular plasticity, but the molecular basis of transdifferentiation is not known. Here, we show the molecular basis using lineage-depleted oncostatin M receptor beta-expressing (Lin(-)OSMRbeta(+)) mouse bone marrow cells in a hepatic differentiation culture system. Differentiation of the cells was marked by the expression of albumin. Hepatocyte nuclear factor (HNF)-4alpha was expressed and translocated into the nuclei of the differentiating cells. Suppression of its activation in OSM-neutralized culture medium inhibited cellular differentiation. Ectopic expression of full-length HNF4alpha in 32D myeloid cells resulted in decreased myeloid colony-forming potential and increased expression of hepatocyte-specific genes and proteins. Nevertheless, the neohepatocytes produced in culture expressed active P450 enzyme. The obligatory role of HNF4alpha in hepatic differentiation was confirmed by transfecting Lin(-)OSMRbeta(+) cells with dominant negative HNF4alpha in the differentiation culture because its expression inhibited the transcription of the albumin and tyrosine aminotransferase genes. The loss and gain of functional activities strongly suggested that HNF4alpha plays a central role in the transdifferentiation process. For the first time, this report demonstrates the mechanism of transdifferentiation of hematopoietic cells into hepatocytes, in which HNF4alpha serves as a molecular switch.