Cholangiocarcinoma (CCA) is a dreaded complication of primary sclerosing cholangitis (PSC); however, marked variability in the incidence of CCA in PSC is reported. Furthermore, limited information exists on risk factors for the development of CCA in PSC. The aim of this study was to determine the incidence of CCA in patients with PSC and to evaluate baseline risk factors for the later development of CCA. From a previous study of the natural history of PSC, we identified 161 patients with PSC who did not have CCA at study entry. Patients were followed until a diagnosis of CCA was established, liver transplantation was performed, or death occurred. Patients were followed for a median of 11.5 yr (interquartile range 4.0-16.1 yr). Fifty-nine patients (36.6%) died, 50 patients (31.1%) underwent liver transplantation, and 11 patients (6.8%) developed CCA. The rate of CCA developing was approximately 0.6% per year. Compared to the incidence rates of CCA in the general population, the relative risk of CCA in PSC was significantly increased (RR = 1,560; 95%CI = 780, 2,793; p < 0.0001). On univariate analysis, a history of variceal bleeding (p < 0.001), proctocolectomy (p= 0.01), and lack of symptoms (p= 0.02) were significant risk factors for CCA with the Mayo Risk Score being marginally significant (p= 0.051). Multivariate analysis determined only variceal bleeding to be a significant risk factor for CCA (RR 24.2; 95%CI: 3.3-67.1). No association was found between the duration of PSC and the incidence of CCA. In conclusion, approximately 7% of PSC patients later developed CCA over a mean follow-up of 11.5 yr, which is dramatically higher than the rates in the general population. Variceal bleeding is a major risk factor for the later development of CCA.