Biliary atresia (BA) is the most common identifiable hepatobiliary disease affecting infants, in which there are defects in intra- and extrahepatic bile ducts and progressive fibrosis. Activation of interferon-gamma (IFNγ) appears to be critical in both patients with BA and in rodent models of BA. We have recently reported a zebrafish model of biliary disease that shares features with BA, in which inhibition of DNA methylation leads to intrahepatic biliary defects and activation of IFNγ target genes. Here we report that ifng genes are hypomethylated and upregulated in zebrafish larvae treated with azacytidine (azaC), an inhibitor of DNA methylation. Injection of IFNγ protein into developing zebrafish larvae leads to biliary defects, suggesting that activation of the IFNγ pathway is sufficient to cause developmental biliary defects. These defects are associated with decreased cholangiocyte proliferation and with a decrease in the expression of vhnf1 (hnf1b, tcf2), which encodes a homeodomain protein with previously reported roles in biliary development in multiple models. These results support an importance of IFNγ in mediating biliary defects, and also demonstrate the feasibility of direct injection of intact protein into developing zebrafish larvae.