Activation of innate immunity (natural killer [NK] cell/interferon‐γ [IFN‐γ]) has been shown to play an important role in antiviral and antitumor defenses as well as antifibrogenesis. However, little is known about the regulation of innate immunity during chronic liver injury. Here, we compared the functions of NK cells in early and advanced liver fibrosis induced by a 2‐week or a 10‐week carbon tetrachloride (CCl₄) challenge, respectively. Injection of polyinosinic‐polycytidylic acid (poly I:C) or IFN‐γ induced NK cell activation and NK cell killing of hepatic stellate cells (HSCs) in the 2‐week CCl₄ model. Such activation was diminished in the 10‐week CCl₄ model. Consistent with these findings, the inhibitory effect of poly I:C and IFN‐γ on liver fibrosis was markedly reduced in the 10‐week versus the 2‐week CCl₄ model. In vitro coculture experiments demonstrated that 4‐day cultured (early activated) HSCs induce NK cell activation via an NK group 2 member D/retinoic acid–induced early gene 1–dependent mechanism. Such activation was reduced when cocultured with 8‐day cultured (intermediately activated) HSCs due to the production of transforming growth factor‐β (TGF‐β) by HSCs. Moreover, early activated HSCs were sensitive, whereas intermediately activated HSCs were resistant to IFN‐γ–mediated inhibition of cell proliferation, likely due to elevated expression of suppressor of cytokine signaling 1 (SOCS1). Disruption of the SOCS1 gene restored the IFN‐γ inhibition of cell proliferation in intermediately activated HSCs. Production of retinol metabolites by HSCs contributed to SOCS1 induction and subsequently inhibited IFN‐γ signaling and functioning, whereas production of TGF‐β by HSCs inhibited NK cell function and cytotoxicity against HSCs. Conclusion: The antifibrogenic effects of NK cell/IFN‐γ are suppressed during advanced liver injury, which is likely due to increased production of TGF‐β and expression of SOCS1 in intermediately activated HSCs. (HEPATOLOGY 2011;)