Despite the robust healing capacity of the liver, regenerative failure underlies numerous hepatic diseases, including the JAG1 haploinsufficient disorder, Alagille syndrome (ALGS). Cholestasis due to intrahepatic duct (IHD) paucity resolves in certain ALGS cases but fails in most with no clear mechanisms or therapeutic interventions. We find that modulating jag1b and jag2b allele dosage is sufficient to stratify these distinct outcomes, which can be either exacerbated or rescued with genetic manipulation of Notch signaling, demonstrating that perturbations of Jag/Notch signaling may be causal for the spectrum of ALGS liver severities. Although regenerating IHD cells proliferate, they remain clustered in mutants that fail to recover due to a blunted elevation of Notch signaling in the distal-most IHD cells. Increased Notch signaling is required for regenerating IHD cells to branch and segregate into the peripheral region of the growing liver, where biliary paucity is commonly observed in ALGS. Mosaic loss- and-gain-of-function analysis reveals Sox9b to be a key Notch transcriptional effector required cell autonomously to regulate these cellular dynamics during IHD regeneration. Treatment with a small-molecule putative Notch agonist stimulates Sox9 expression in ALGS patient fibroblasts and enhances hepatic sox9b expression, rescues IHD paucity and cholestasis, and increases survival in zebrafish mutants, thereby providing a proof-of-concept therapeutic avenue for this disorder.