Caroli's disease belongs to a group of hepatic fibropolycystic diseases and is a hepatic manifestation of autosomal recessive polycystic kidney disease (ARPKD). It is a congenital disorder characterized by segmental saccular dilatations of the large intrahepatic bile duct and is frequently associated with congenital hepatic fibrosis (CHF). The most viable theory explaining its pathogenesis suggests that it is related to ductal plate malformation. The development of the polycystic kidney (PCK) rat, an orthologous rodent model of Caroli's disease with CHF as well as ARPKD, has allowed the molecular pathogenesis of the disease and the therapeutic options for its treatment to be examined. The relevance of the findings of studies using PCK rats and/or the cholangiocyte cell line derived from them to the pathogenesis of human Caroli's disease is currently being analyzed. Fibrocystin/polyductin, the gene product responsible for ARPKD, is normally localized to primary cilia, and defects in the fibrocystin from primary cilia are observed in PCK cholangiocytes. Ciliopathies involving PCK cholangiocytes (cholangiociliopathies) appear to be associated with decreased intracellular calcium levels and increased cAMP concentrations, causing cholangiocyte hyperproliferation, abnormal cell matrix interactions, and altered fluid secretion, which ultimately result in bile duct dilatation. This article reviews the current knowledge about the pathogenesis of Caroli's disease with CHF, particularly focusing on studies of the mechanism responsible for the biliary dysgenesis observed in PCK rats.