Congenital cystic dilation of the intrahepatic bile ducts (Caroli's syndrome) is a rare cause of chronic cholestasis and hepatolithiasis in young adults. Long-term prognosis is poor even with surgical drainage. We treated twelve patients who had Caroli's syndrome and intrahepatic stones with ursodeoxycholic acid (UDCA), 10-20 mg/kg daily. The duodenal bile of these patients contained cholesterol crystals, which suggests that the stones were cholesterol rich. UDCA led to sustained clinical remission, return to normal liver function, and dissolution of intrahepatic stones on ultrasound in all patients (nine partial, three complete) after 48 (range 12-114) months' follow-up. Litholytic therapy is indicated for intrahepatic stones in Caroli's syndrome.