The purpose of this study was to evaluate the accuracy of diffusion-weighted magnetic resonance imaging (DW-MRI) in differentiating HCC from benign cirrhotic lesions compared with conventional dynamic contrast-enhanced MRI. Fifty-five patients with cirrhosis underwent conventional and DW-MRI at 1.5 Tesla. Signal intensity ratios (SI(ratio)) of solid liver lesions to adjacent hepatic parenchyma were measured for b0, b100, b600 and b1000, and the apparent diffusion coefficients (ADC) were calculated. In 27 patients, imaging results were compared to histopathology, and in 28 patients, to imaging follow-up. Based on predetermined thresholds, sensitivity and specificity of DW-MRI and conventional MRI were compared. SI(ratio) was significantly different between malignant and benign lesions at all b-values (P < 0.0001). No significant difference in ADC was seen (P = 0.47). For detection of malignant lesions, DW-MRI with b600-SI(ratio) yielded a sensitivity of 95.2% compared to 80.6% for conventional MRI (P = 0.023) and a specificity of 82.7% compared to 65.4% (P = 0.064). The improved accuracy was most beneficial for differentiating malignant lesions smaller than 2 cm. DW-MRI with b600-SI(ratio) improved the detection of small HCC and the differentiation of pseudotumoral lesions compared with conventional MRI.