The question of whether hepatocellular carcinoma (HCC) arises from the differentiation block of stem cells or dedifferentiation of mature cells remains controversial. Recently, researchers suggested that HCC may originate from the transdifferentiation of bone marrow cells. Interestingly, there are four levels of cells in the hepatic stem cell lineage: bone marrow cells, hepato-pancreas stem cells, oval cells and hepatocytes. Hematopoietic stem cells and the liver are known to have a close relationship in early development. Bone marrow stem cells could differentiate into oval cells, which could differentiate into hepatocytes and duct cells. The development of pancreatic and liver buds in embryogenesis suggests the existence of a common progenitor cell to both the pancreas and liver. Cellular events during hepatocarcinogenesis illustrate that HCC may arise from cells at various stages of differentiation in the hepatic stem cell lineage.