We recently reported the isolation and characterization of a novel population of progenitor cells called liver-derived progenitor cells (LDPCs), which could differentiate into functional hepatocytes in vitro. However, our original studies resulted in relatively low and variable hepatic differentiation efficiency without validation of in vivo potential of LDPCs. Here, we report an efficient and robust hepatic differentiation of LDPCs under well-defined culture conditions and in vivo differentiation of LDPCs to mature hepatocytes. In addition to morphological studies, we performed reverse-transcription polymerase chain reaction (RT-PCR) and microRNA analyses of the in vitro hepatic differentiation of LDPCs to substantiate the efficiency of the differentiation process. The histological studies on the differentiated LDPCs showed that more than 50% of the cells were positive for albumin, cytokeratin 18, and hepatocyte nuclear factor 1α and contained glycogen particles, all consistent with differentiation to functional hepatocytes. We also demonstrated by RT-PCR that upon differentiation, they expressed several markers found in mature hepatocytes and the microRNA profile of LDPCs became similar to the profile of fresh hepatocytes, confirming our morphological findings. Finally, the transplantation of LDPCs in a dipeptidyl peptidase IV-deficient (DPPIV-/-) rat model showed that LDPCs were able to engraft and form mature hepatocytes in the livers of the DPPIV-/- rats. In summary, LDPCs are a unique population of liver progenitor cells capable of hepatic differentiation both in vitro and in vivo, which makes them a potentially valuable resource for important applications such as pharmacological studies and cell therapies for a variety of liver disorders.