Fifty-four patients with cirrhosis, found to have a space-occupying lesion in the liver by ultrasound (US), underwent US-assisted biopsy of the lesion and were then followed prospectively to define outcome and survival. Histologic examination revealed hepatocellular carcinoma in 26 patients, while five had liver cell dysplasia without hepatocellular carcinoma and 23 had no evidence of tumor or of dysplasia. All five patients with an initial diagnosis of dysplasia developed hepatocellular carcinoma during follow-up and their survival curve was similar to that of patients with liver cancer and significantly worse than that of patients without dysplasia or tumor. There were five false-negative cases of hepatocellular carcinoma among the patients with negative histology. Overall, US-assisted liver biopsy diagnosed malignancy with a sensitivity of 72%, which increased to 86% when dysplasia was considered a pre-neoplastic lesion.