It has been established that small, equivocal nodular lesions such as dysplastic nodules (DNs) and small well-differentiated hepatocellular carcinomas (early HCCs) are frequently observed in noncancerous liver tissues resected along with HCCs and in explant cirrhotic livers. DNs are classified into low-grade DNs or high-grade DNs on the basis of cytological and architectural atypia; high-grade DNs show varying degrees of cytological or architectural atypia, or both. Early HCCs are indistinctly nodular and highly differentiated and are frequently difficult to differentiate from high-grade DNs. Although the pathological diagnosis of high-grade DNs and early HCCs is controversial, the presence of tumor cell invasion into the intratumoral portal tracts (stromal invasion) is a helpful clue for differentiating early HCC from high-grade DNs. It is highly suggested that many HCCs occurring in cirrhotic liver arise in DNs and develop to classical HCC in a multistep fashion.