Objectives: Primary sclerosing cholangitis (PSC) is a chronic liver disease characterized by biliary inflammation and fibrosis. We observed an increased interferon (IFN)γ response in PSC patients and in a mouse model of sclerosing cholangitis. IFNγ induced the cytotoxic effector molecules granzyme B (GzmB) and tumor necrosis factor-related apoptosis-inducing ligand (TRAIL) in intrahepatic NK and CD8+ T cells and mediated liver fibrosis in Mdr2-/- mice. Here, we analyzed the appearance of cytotoxic lymphocytes in PSC patients and investigated the significance of GzmB and TRAIL for PSC progression in Mdr2-/- mice. Methods: Single-cell RNA-seq and CITE-seq analysis was combined with multi-parameter flow cytometry. Mdr2-/- x GzmB-/- and Mdr2-/- x Tnfs10-/- mice were used for functional analyses. CD8+ T cells, isolated from C57Bl6 or Tnfsf10-/- mice, were adoptively transferred into Mdr2-/- x Rag1-/- mice. Cholangiocytes were visualized by immunohistochemistry. Liver injury and fibrosis were determined by standard assays. Results: We identified CD8+ T cell clusters with a cytotoxic gene expression profile in livers of PSC patients. GzmB and TRAIL expression was increased in hepatic NK and CD8+ T cells in Mdr2-/- mice compared to C57Bl6 controls. Lack of GzmB did not affect the phenotype of these cytotoxic lymphocyte subsets but resulted in less severe liver injury and fibrosis. In contrast, disease severity of sclerosing cholangitis was exacerbated in absence of TRAIL. This was associated with increased expression of IFNγ and GzmB by NK and T cells, enhanced survival of hepatic T cells and expansion of cholangiocytes and stellate cells. Adoptive transfer of Tnfsf10-/- CD8+ T cells to Mdr2-/- x Rag1-/- mice increased IFNγ production and liver damage compared to transfer of C57Bl6 CD8+ T cells. Conclusion: While GzmB induces hepatic cell death and fibrosis in sclerosing cholangitis, TRAIL suppresses inflammatory and cytotoxic immune responses subsequently leading to reduced stellate cell activation and fibrosis.