Hepcidin is downregulated during progressive cholestasis in biliary atresia, but the mechanism is unknown. To verify whether downregulation of hepcidin is specific to cholestasis irrespective of the patient''s age, we first analyzed liver hepcidin mRNA and protein expression in adults with primary biliary cirrhosis (PBC) (n=4), non-cholestatic cirrhosis (n=19) and in controls (n=9). We evaluated the tyrosine phosphorylation of signal transducer and activator of transcription 3 (pSTAT3) expressions in the liver sections. A rat model of cholestasis by ligation of the extrahepatic bile duct (BDL) was created, and lipopolysaccharide (LPS)-induced cholangitis in cholestatic rats 2 weeks after BDL was also established to study the modulation of hepcidin by interleukin-6 (IL-6) and STAT3 signaling pathway in these models, using real-time quantitative reverse transcription–PCR, immunohistochemistry, western blotting and enzyme-linked immunosorbent assay (ELISA). An in vitro study of the effect of bile acids on hepcidin expression was carried out to re-confirm the in vivo findings. There was significantly lower hepcidin mRNA and pSTAT3 protein expression in cholestatic cirrhosis compared with non-cholestatic cirrhosis in adults. BDL caused significant decrease in hepcidin and gp130 mRNA expression compared with sham-operated group and normal control. Furthermore, there was significantly lower pSTAT3 protein expression and nuclear translocation in the cholestatic liver from the patients and the BDL rats, which was comparable to lower liver hepcidin mRNA and plasma hepcidin expression. Furthermore, BDL for 2 weeks attenuated the upregulation of hepcidin expression induced by LPS. Hydrophobic bile acid glycochenodeoxycholate inhibited IL-6-induced pSTAT3 expression in primary hepatocytes and resulted in the downregulation of hepcidin mRNA expression. In conclusion, the study shows that cholestasis or its important component—hydrophobic bile acids—can downregulate hepcidin expression through inhibiting IL-6-induced STAT3 phosphorylation and pSTAT3 protein nuclear translocation.