Superior insights into molecular mechanisms of liver failure, which are not fully understood, will help strategies for inducing liver regeneration. We examined hepatotoxic mechanisms in mice homozygous for the severe combined immune deficiency mutation in the protein kinase, DNA-activated, catalytic polypeptide. Mice were treated with rifampicin, phenytoin, and monocrotaline. The ensuing acute liver failure was characterized by serological, histological, and mRNA studies. Subsequently, we studied whether transplantation of hepatocytes could rescue animals with liver failure. We found extensive liver damage in these animals, with mortality over several days. The expression of multiple hepatic genes was rapidly altered, including those representing pathways in oxidative/metabolic stress, inflammation, DNA damage-repair, and ataxia telangiectasia mutant (Atm) signaling pathways. This led to liver cell growth arrest involving cyclin-dependent kinase inhibitor 1A. Transplantation of hepatocytes with microcarriers in the peritoneal cavity efficiently rescued animals with liver failure. Molecular abnormalities rapidly reversed, including in hepatic Atm and downstream signaling pathways; and residual hepatocytes overcame cyclin-dependent kinase inhibitor 1A-induced cell growth arrest. Reseeding of the liver with transplanted hepatocytes was not required for rescue because native hepatocytes overcame cell growth-arrest to regenerate the liver. This likely resulted from paracrine signaling from hepatocytes in the peritoneal cavity. We concluded that Atm signaling played critical roles in the pathological features of liver failure. These studies should help redirect examination of pathophysiologic and therapeutic mechanisms in liver failure.