Aberrant β-catenin activation contributes to a third or more of human hepatocellular carcinoma (HCC), but β-catenin activation alone is not sufficient to induce liver cancer in mice. Differentiated hepatocytes proliferate upon acute activation of either β-catenin or the nuclear xenobiotic receptor CAR. These responses are strictly limited and are tightly linked, since β-catenin is activated in nearly all of the CAR-dependent tumours generated by the tumour promoter phenobarbital. Here, we show that full activation of β-catenin in the liver induces senescence and growth arrest, which is overcome by combined CAR activation, resulting in uncontrolled hepatocyte proliferation, hepatomegaly and rapid lethality despite maintenance of normal liver function. Combining CAR activation with limited β-catenin activation induces tumorigenesis, and the tumours share a conserved gene expression signature with β-catenin-positive human HCC. These results reveal an unexpected route for hepatocyte proliferation and define a murine model of hepatocarcinogenesis with direct relevance to human HCC.