In an attempt to determine the cllinical significance of liver cell dysplasia (LCD) arising in the course of chronic liver diseases, studies were made on the incidence of LCD among various liver diseases, on presistence of LCD in chronic hepatitis and liver cirrhosis, and on the prognosis of LCD-positive patients with chronic hepatitis or liver cirrhosis. The incidence of LCD was significantly higher in liver cirrhosis with hepatocellular carcinoma than in normal liver, chronic hepatitis, liver cirrhosis or metastatic liver cancer. LCD persisted for years in some cases of chronic hepatitis and liver cirrhosis while in others it disappeared in a relatively short period of time. In patients who subsequently developed hepatocellular carcinoma, however, LCD never disappeared throughout the follow-up period. The incidence of hepatocellular carcinoma developing over a period of 5 years was significantly higher in LCD-positive than in LCD-negative patients. These observations suggest that a close relationship exists between LCD and development of hepatocellular carcinoma and that LCD may serve as a morphological indicator of the premalignant condition hepatocellular carcinnoma.