Hepatocellular carcinoma (HCC) has a poor prognosis with limited therapeutic options. We propose that local immune responses in patients with HCC are held in check by tumor-infiltrating CD4(+)CD25(+) T-regulatory lymphocytes (T(reg) cells), which suppress the activity and proliferation of effector CD4(+) and CD8(+) T cells. The phenotype and cell cycle status of tumor-infiltrating lymphocytes (TILs) in HCC were analyzed via immunohistochemistry of sections from patients undergoing surgery for HCC and via flow cytometry of peripheral blood mononuclear cells and TILs isolated from patients with HCC. Circulating and tumor-infiltrating T-cell function and activation status were assessed via proliferation and flow cytometry. More than 96% of TILs were quiescent as measured via Mcm-2 or Ki-67 expression, while less than 10% of CD8(+) T cells expressed perforin or granzyme B. CD4(+)CD25(+) T(reg) cells comprised 8.7% (1.4-13.8) of TILs and always exceeded the proportion in distant nontumor tissue (2.4% [1.5-5.6]; P = .014). T(reg) cells isolated from HCC suppressed proliferation of autologous circulating CD4(+)CD25(-) cells and perforin expression and proliferation of autologous CD8(+) T cells. The proportion of circulating T(reg) cells in patients with HCC was similar in healthy controls (7.2% [1.2-23.3] and 9.2% [1.6-30.2], respectively), but the proportion of circulating T(reg) cells that were also transforming growth factor beta1(+) was elevated in HCC compared with controls (55.5% [8.2-73.9] and 2.0% [0-4.9], respectively; P = .003). In conclusion, TILs are compromised and contain a subpopulation of suppressive CD4(+)CD25(+)Foxp3(+) T(reg) cells. Functional deletion of tumor-infiltrating T(reg) cells could enhance tumor-specific immunotherapy.