The spontaneous hepatocellular neoplasms of C3H (MTV-ve) male mice were compared with the hepatic tumors induced in these animals by diethylnitrosamine (DEN) and dieldrin. No morphologic differences could be detected by light or electron microscopy between the spontaneous and induced lesions. However, the animals given diethylnitrosamine or dieldrin developed the lesions earlier, in greater numbers and of larger size. The earliest change was the development of foci composed of clear cells. Later nodules appeared which were composed of clear or basophilic cells. These lesions were followed by and presumably progressed to nodules of trabecular hepatocellular carcinomas. It is postulated that in this series, the first morphological step in the neoplastic transformation is the appearance of unusually clear hepatocytes. Ultrastructurally, the clear cells had increased glycogen and lipid droplets and a decrease in smooth endoplasmic reticulum. The basophilic cells seen later resembled the clear cells except for having a greatly increased rough endoplasmic reticulum. Trabecular hepatocellular carcinomas differed from benign nodules in the greater secretory activity of the rough endoplasmic reticulum, in the development of basement membranes at the vascular pole and of microvilli along the lateral cell membranes. The stepwise progression of normal hepatocytes to hepatocellular carcinoma is discussed on the basis of these sequential light microscopic and ultrastructural observations.