The p53 tumor suppressor coordinates a series of antiproliferative responses that restrict the expansion of malignant cells, and as a consequence, p53 is lost or mutated in the majority of human cancers. Here, we show that p53 restricts expression of the stem and progenitor-cell-associated protein nestin in an Sp1/3 transcription-factor-dependent manner and that Nestin is required for tumor initiation in vivo. Moreover, loss of p53 facilitates dedifferentiation of mature hepatocytes into nestin-positive progenitor-like cells, which are poised to differentiate into hepatocellular carcinomas (HCCs) or cholangiocarcinomas (CCs) in response to lineage-specific mutations that target Wnt and Notch signaling, respectively. Many human HCCs and CCs show elevated nestin expression, which correlates with p53 loss of function and is associated with decreased patient survival. Therefore, transcriptional repression of Nestin by p53 restricts cellular plasticity and tumorigenesis in liver cancer.