BACKGROUND: Nonsense-mediated mRNA decay (NMD) is a post-transcriptional RNA surveillance process that facilitates the recognition and destruction of mRNAs bearing premature terminations codons (PTCs). Such PTC-containing (PTC+) mRNAs may arise from different processes, including erroneous processing and expression of pseudogenes, but also from more regulated events such as alternative splicing coupled NMD (AS-NMD). Thus, the NMD pathway serves both as a silencer of genomic noise and a regulator of gene expression. Given the early embryonic lethality in NMD deficient mice, uncovering the full regulatory potential of the NMD pathway in mammals will require the functional assessment of NMD in different tissues. METHODOLOGY/PRINCIPAL FINDINGS: Here we use mouse genetics to address the role of UPF2, a core NMD component, in the development, function and regeneration of the liver. We find that loss of NMD during fetal liver development is incompatible with postnatal life due to failure of terminal differentiation. Moreover, deletion of Upf2 in the adult liver results in hepatosteatosis and disruption of liver homeostasis. Finally, NMD was found to be absolutely required for liver regeneration. CONCLUSION/SIGNIFICANCE: Collectively, our data demonstrate the critical role of the NMD pathway in liver development, function and regeneration and highlights the importance of NMD for mammalian biology.