There is clinical evidence that chronic liver diseases in which MDBs (Mallory Denk Bodies) form progress to hepatocellular carcinoma. The present study provides evidence that links MDB formation induced by chronic drug injury, with preneoplasia and later to the formation of tumors, which develop long after drug withdrawal. Evidence indicated that this link was due to an epigenetic cellular memory induced by chronic drug ingestion. Microarray analysis showed that the expressions of many markers of preneoplasia (UBD, Alpha Fetoprotein, KLF6 and glutathione-S-transferase mu2) were increased together when the drug DDC was refed. These changes were suppressed by S-adenosylmethionine feeding, indicating that the drug was affecting DNA and histones methylation in an epigenetic manner. The link between MDB formation and neoplasia formation was likely due to the over expression of UBD (also called FAT10), which is up regulated in 90% of human hepatocellular carcinomas. Immunohistochemical staining of drug-primed mouse livers showed that FAT10 positive liver cells persisted up to 4 months after drug withdrawal and they were still found in the livers of mice, 14 months after drug withdrawal. The refeeding of DDC increased the percent of FAT10 hepatocytes.