Transglutaminase 2 (Tgm2) plays an essential role in hepatic repair following prolonged toxic injury. During cholestatic liver injury, the intrahepatic cholangiocytes undergo dynamic tissue expansion and remodelling, referred to as ductular reaction (DR), which is crucial for liver regeneration. However, the molecular mechanisms governing the dynamics of active cells in DR are still largely unclear. Here, we generated Tgm2-knockout mice (Tgm2-/-) and Tgm2-CreERT2-Rosa26-mTmG flox/flox (Tgm2CreERT2-R26T/Gf/f) mice and performed a three-dimensional (3D) collagen gel culture of mouse hepatocytes to demonstrate how Tgm2 signalling is involved in DR to remodel intrahepatic cholangiocytes. Our results showed that the deletion of Tgm2 adversely affected the functionality and maturity of the proliferative cholangiocytes in DR, thus leading to more severe cholestasis during DDC-induced liver injury. Additionally, Tgm2 hepatocytes played a crucial role in the regulation of DR through metaplasia. We unveiled that Tgm2 regulated H3K4me3Q5ser via serotonin to promote BMP signalling activation to participate in DR. Besides, we revealed that the activation or inhibition of BMP signalling could promote or suppress the development and maturation of cholangiocytes in DDC-induced DR. Furthermore, our 3D collagen gel culture assay indicated that Tgm2 was vital for the development of cholangiocytes in vitro. Our results uncovered a considerable role of BMP signalling in controlling metaplasia of Tgm2 hepatocytes in DR and revealed the phenotypic plasticity of mature hepatocytes.