In the liver, ductal cells rarely proliferate during homeostasis but do so transiently after tissue injury. These cells can be expanded as organoids that recapitulate several of the cell-autonomous mechanisms of regeneration but lack the stromal interactions of the native tissue. Here, using organoid co-cultures that recapitulate the ductal-to-mesenchymal cell architecture of the portal tract, we demonstrate that a subpopulation of mouse periportal mesenchymal cells exerts dual control on proliferation of the epithelium. Ductal cell proliferation is either induced and sustained or, conversely, completely abolished, depending on the number of direct mesenchymal cell contacts, through a mechanism mediated, at least in part, by Notch signaling. Our findings expand the concept of the cellular niche in epithelial tissues, whereby not only soluble factors but also cell-cell contacts are the key regulatory cues involved in the control of cellular behaviors, suggesting a critical role for cell-cell contacts during regeneration.