BACKGROUND & AIMS: Hepatocyte differentiation is controlled by liver-enriched transcription factors (LETFs). We investigated whether LETFs control microRNA expression during development and whether this control is required for hepatocyte differentiation. METHODS: Using in vivo DNA binding assays, we identified miR-122 as a direct target of the LETF hepatocyte nuclear factor (HNF) 6. The role and mechanisms of the HNF6-miR-122 gene cascade in hepatocyte differentiation were studied in vivo and in vitro by gain-of-function and loss-of-function experiments, using developing mice and zebrafish as model organisms. RESULTS: HNF6 and its paralog Onecut2 are strong transcriptional stimulators of miR-122 expression. Specific levels of miR-122 were required for proper progression of hepatocyte differentiation; miR-122 stimulated the expression of hepatocyte-specific genes and most LETFs, including HNF6. This indicates that HNF6 and miR-122 form a positive feedback loop. Stimulation of hepatocyte differentiation by miR-122 was lost in HNF6-null mice, revealing that a transcription factor can mediate microRNA function. All hepatocyte-specific genes whose expression was stimulated by miR-122 bound HNF6 in vivo, confirming their direct regulation by this factor. CONCLUSIONS: Hepatocyte differentiation is directed by a positive feedback loop that includes a transcription factor (HNF6) and a microRNA (miR-122) that are specifically expressed in liver. These findings could lead to methods to induce differentiation of hepatocytes in vitro and improve our understanding of liver cell dedifferentiation in pathologic conditions.