Although telomerase activity in hepatocellular carcinoma (HCC) increases in accordance with degree of histological undifferentiation, it is unknown whether the level of telomerase activity in HCC reflects of the degree of activity in individual cells or the frequency of telomerase-positive HCC cells. Non-cancerous liver tissues exhibit low but significant levels of telomerase activity, but the nature of telomerase-positive cells in these tissues is unclear. In this study, we performed immunohistochemical staining using specific antibody against telomerase reverse transcriptase (hTERT) protein in 15 HCC samples and 13 adjacent non-cancerous liver tissues. There were hTERT-positive hepatocytes, though very low frequency, in non-cancerous liver tissues. The frequencies in hTERT positive hepatocytes were very well correlated with clinicopathological parameters and telomerase activity levels: the average frequencies of chronic hepatitis was 0.2%, liver cirrhosis 0.2%, well-differentiated HCC 3.0%, moderately differentiated HCC 28%, and poorly differentiated HCC 95%. The intensity of staining varied among cells within a given specimen, and correlation with degree of histological undifferentiation was less obvious. Portions of migrating lymphocytes and biliary epithelial cells were also hTERT-positive. These findings indicate that the upregulation of telomerase activity with degree of undifferentiation of HCC is mainly due to the increase in frequency of hTERT positive HCC cells.