The genetic profile of dysplastic hepatocellular nodules arising in cirrhosis is poorly understood. We assessed loss of heterozygosity (LOH) and microsatellite instability (MI) in 10 dysplastic nodules (4 low-grade and 6 high-grade) with surrounding cirrhosis and in 10 hepatocellular carcinomas (HCC). Six microsatellite loci were selected and investigated on microdissected needle biopsies. Twenty-four (24.4%) informative loci showed allelic loss, while MI was seen in 3 loci only (3%). The most involved sites were located on chromosomes 4q (54.5%) and 8p (50%). LOH was documented in 16.6%, cirrhotic, 50% low-grade dysplastic nodules (LGDN), 83% high-grade dysplastic nodules (HGDN), and 70% malignant nodules. LOH at multiple loci was increasingly seen from cirrhotic to HGDN, but not from the latter to HCC. The fractional allelic loss (FAL) was significantly increased in dysplastic and neoplastic nodules as compared with cirrhosis (P <.01). The progressive accumulation of genetic changes in cirrhotic, dysplastic, and malignant hepatocellular nodules is in keeping with a multistep process of carcinogenesis; within this spectrum, HGDN can be considered advanced precursors of HCC.