There is no accurate method to determine the functional significance of bile duct strictures after liver transplantation, and although biliary reconstructive surgery (Rouxen-Y hepaticojejunostomy, HJ) is the second-line treatment in patients with persistent allograft dysfunction following failed endoscopic therapy, there is no evidence to support this approach. Liver transplant recipients with allograft dysfunction and demonstrable bile duct strictures who had undergone hepaticojejunostomy were identified from a prospective database. Preoperative and follow-up clinical, biochemical, and radiological data were collected. Perioperative liver biopsies were evaluated prospectively by two histopathologists blinded to clinical information. The biopsies were scored according to presence and severity of biliary features, fibrosis, and coexisting diseases. The effects of preoperative factors on postoperative allograft function were analyzed using SPSS statistical software. After hepatico-jejunostomy, graft function returned to normal in 8/44 patients (18%), improved in 16/44 (36%), but remained abnormal in 20/44 (45%), including 4 patients who subsequently underwent retransplantation. Hepaticojejunostomy was more likely to yield a favorable outcome (improved or normal graft function) when performed within 2 years of transplantation. Prolonged duration of biliary obstruction was associated with development of advanced graft fibrosis at the time of surgery, but neither factor significantly influenced postoperative graft function. In conclusion, biliary reconstruction successfully restores graft function in the majority of patients who present with anastomotic strictures within the first 2 years after liver transplantation. In patients presenting with bile duct strictures late after transplantation, surgery should be reserved for selected patients without histological evidence of graft fibrosis (moderate -severe) or significant nonbiliary pathology. (