Injury to the biliary epithelium triggers inflammation and fibrosis, which can result in severe liver diseases and may progress to malignancy. Development of a type 1 immune response has been linked to biliary injury pathogenesis; however, a subset of patients with biliary atresia, the most common childhood cholangiopathy, exhibit increased levels of Th2-promoting cytokines. The relationship among different inflammatory drivers, epithelial repair, and carcinogenesis remains unclear. Here, we determined that the Th2-activating cytokine IL-33 is elevated in biliary atresia patient serum and in the livers and bile ducts of mice with experimental biliary atresia. Administration of IL-33 to WT mice markedly increased cholangiocyte proliferation and promoted sustained cell growth, resulting in dramatic and rapid enlargement of extrahepatic bile ducts. The IL-33–dependent proliferative response was mediated by an increase in the number of type 2 innate lymphoid cells (ILC2s), which released high levels of IL-13 that in turn promoted cholangiocyte hyperplasia. Induction of the IL-33/ILC2/IL-13 circuit in a murine biliary injury model promoted epithelial repair; however, induction of this circuit in mice with constitutive activation of AKT and YAP in bile ducts induced cholangiocarcinoma with liver metastases. These findings reveal that IL-33 mediates epithelial proliferation and suggest that activation of IL-33/ILC2/IL-13 may improve biliary repair and disruption of the circuit may block progression of carcinogenesis.