From a series of 320 heptocellular carcinoma (HCC) cases treated surgically, we selected small nodular lesions that had not destroyed the preexisting liver structure grossly. After excluding metastases and large regenerative nodules, 58 lesions from 41 cases were chosen. All the lesions were hypercellular. Among them, 33 lesions showing histologic features of very well-differentiated HCC (Edmondson grade I), that is, small hepatocytes with little cellular atypia but with structural atypia, such as a thin trabecular structure of acinar formation in some areas, were classified as early HCC (eHCC). In seven eHCCs, areas of overt carcinoma, classified as Edmondson grade II, were found in the background of Edmondson grade I carcinoma. The remaining 25 lesions lacked structural atypia and were classified as adenomatous hyperplasia (AH). Among the AHs, 10 nodules with a very focal abnormal structure were subclassified as atypical adenomatous hyperplasia (AAH). There was a tendency for the size and cellularity of the atypical lesions to increase in order from AH to AAH to eHCC. All nodules larger than 1.5 cm were eHCC. A degree of cellularity more than twice that of a regenerative nodular was suggested to be an indicator of HCC. All small nodular lesions were associated with chronic liver disease. These histologic observations appear to explain the stepwise development of overt HCC from very well-differentiated eHCC, and of eHCC from AH probably through AAH, at least in cases of HCC associated with chronic liver disease.