A prospective surveillance of hepatocellular carcinoma (HCC) using serum alpha-fetoprotein and high-resolution, linear-array, real-time ultrasonography was carried out in 432 patients with clinicopathologically proven chronic type B hepatitis. During a follow-up period of 6-85 mo (median 23, mean 26.9 +/- 16.8 mo), asymptomatic HCC was identified in 8 patients, with a calculated annual incidence of 826/100,000, and 2768/100,000 for patients over age 35 yr. The relative risk of developing HCC in hepatitis B surface antigen-positive chronic hepatitis patients was 2 when compared to those that were hepatitis B surface antigen-negative, and was 5 when compared in patients over age 35 yr. Hepatocellular carcinomas detected by these methods were in a relatively early stage as most tumors were small, only 50% were associated with cirrhosis, 37.5% were positive for hepatitis B e antibody, and most were still resectable. We, therefore, recommend a combination of alpha-fetoprotein and ultrasonography surveillance in patients with chronic hepatitis in order to improve the chance of early HCC detection as well as the chance for successful resection. In addition, the low incidence of cirrhosis and hepatitis B e antibody in these patients with "early" HCCs and the occurrence of hepatitis B e antigen/hepatitis B e antibody seroconversion after HCC had developed suggest that the development of HCC and progression from hepatitis to cirrhosis were two independent (though related) sequelae of chronic hepatitis B virus infection.