Hepatic fibrosis is considered as a physiological wound‐healing response to liver injury. The process involves several factors, such as hepatocyte growth factor (HGF), which restrains hepatic injury and facilitates reversibility of fibrotic reaction in response to an acute insult. Chronic liver injury and sustained inflammation cause progressive fibrosis and, ultimately, organ dysfunction. The mechanisms tipping the balance from restoration to progressive liver tissue scarring are not well understood. In the present study, we identify a mechanism in which the tumor‐suppressor gene, cylindromatosis (CYLD), confers protection from hepatocellular injury and fibrosis. Mice lacking CYLD (CYLD^−/−) were highly susceptible to hepatocellular damage, inflammation, and fibrosis and revealed significantly lower hepatic HGF levels, compared to wild‐type (WT) animals. Exogenous application of HGF rescued the liver injury phenotype of CYLD^−/− mice. In the absence of CYLD, gene transcription of HGF in hepatic stellate cells was repressed through binding of histone deacetylase 7 (HDAC7) to the promoter of HGF. In WT cells, CYLD removed HDAC7 from the HGF promoter and induced HGF expression. Of note, this interaction occurred independently of the deubiquitinating activity of CYLD. Conclusions: Our findings highlight a novel link between CYLD and HDAC7, offering mechanistic insight into the contribution of these proteins to progression of liver disease. Thus, through regulation of HGF level, CYLD ameliorates hepatocellular damage and liver fibrogenesis. (Hepatology 2014;60:1066–1081)