The incidence and contributing factors of cirrhosis developing in patients with chronic type B hepatitis were assessed prospectively in 684 clinicopathologically verified patients, of which 509 were HBeAg positive and 175 were anti-HBe positive at entry into the study. During an average follow-up period of 35.3 months, cirrhosis occurred 6 to 64 months after entry in 35 HBeAg-positive and 7 anti-HBe positive patients with a calculated annual incidence of 2.4 and 1.3%, respectively (p greater than 0.05). The incidence increased significantly with the increasing age at entry. Patients who had experienced (a) hepatic decompensation, (b) repeated episodes of severe acute exacerbation (with alpha-fetoprotein greater than 100 ng per ml and/or bridging hepatic necrosis), (c) severe acute exacerbation not accompanied by subsequent HBeAg seroconversion and (d) hepatitis B virus reactivation (particularly those with HBeAg reappearance) were found to develop cirrhosis much more frequently (p less than 0.001). Contrary to general belief, patients who had hepatitis delta virus superinfection and patients with chronic active hepatitis were not particularly prone to develop cirrhosis. We conclude that in addition to age factor, the extent, severity, duration, frequency and etiology of the hepatic lobular alterations are important factors for the development of cirrhosis in patients with chronic type B hepatitis.