The histological features of pre-neoplastic lesions in HCV-associated cirrhosis remain uncertain. The aim of this prospective study was to elucidate histological features for predicting the development of hepatocellular carcinoma (HCC). A cohort of 72 consecutive patients with hepatitis C-associated cirrhosis, which was diagnosed by histology investigated for development of HCC. Seven histological features including small cell dysplasia (SCD) and large cell dysplasia (LCD) of liver cirrhosis were evaluated with regard to the development of HCC. In addition, proliferation and apoptosis were investigated using immunohistochemistry by proliferating cell nuclear antigen and TUNEL method, respectively. At enrollment, SCD was observed in the biopsy specimens of 18 out of 72 (25.0%) patients and LCD was observed in 20 out of 72 (27.8%). Twenty eight out of 72 patients (38.9%) developed HCC during a mean follow-up period of 72.4 months. Among the histological parameters, SCD, active inflammation and complete nodule were statistically significant factors for the cumulative probability of developing HCC. However, LCD did not appear to be important for HCC development. In multivariate analysis, SCD was the highest independent risk factor for HCC. Samples with SCD demonstrated a higher proliferative rate and a lower apoptotic rate than normal hepatocytes or samples with LCD. These results indicate that SCD is a major risk factor for HCC. Careful assessment of liver histology may be important in order to predict HCC development in patients with HCV-related cirrhosis.