The natural history of the three-stage process from normal, oral leukoplakia to oral cancer in relation to betel quid chewing, smoking and drinking is rarely addressed. The aim of this study was to simultaneously quantify the effects of three risk factors on occurrence of oral leukoplakia and malignant transformation to oral cancer. A hospital-based case-control study design derived from three retrospective cohorts from 1988 to 1998 was conducted. A total of 74 oral cancer patients, 164 patients with oral leukoplakia and 187 controls were interviewed to collect information on their betel chewing, smoking and drinking habits. The effects of the three risk factors on the progression rates of the three-stage disease process were estimated using the three-state Markov model. Subjects who chewed betel quid were at greater risk of leukoplakia (adjusted odds ratio (OR) 17.7 (9.03-34.5)) but there was no significant effect on malignant transformation (OR 1.04 (0.61-1.76)). Smoking played a major role in the onset of leukoplakia (OR 4.26 (2.21-8.23)) but a minor role in malignant transformation (OR 1.36 (0.69-2.68)). Alcohol was positively associated with malignant transformation (OR 2.37 (1.47-3.82)) but unrelated to occurrence of leukoplakia (OR 0.76 (0.04-1.43)). We concluded that smoking and betel quid were two significant risk factors for the occurrence of leukoplakia, whereas alcohol was significantly responsible for malignant transformation.