To determine the incidence of hepatocellular carcinoma among patients with chronic hepatitis C who received interferon (IFN) therapy, 63 patients with chronic hepatitis C who underwent IFN therapy (IFN alpha 2a 9 x 10(6) IU daily for 2 weeks and followed 9 x 10(6) IU three times weekly for 14 weeks) from January to December 1992, were studied. Selection criteria were as follows: within six months before IFN therapy patients were diagnosed with chronic active hepatitis without cirrhosis by hepatic histological examination, and were hepatitis C virus antibody positive. Furthermore, patients had records of follow-up liver function tests (once a month) for more than six months after IFN therapy completion, and of ultrasound scanning (once in three to four months) before and for at least more than six months after the therapy completion. An average period of observation was 2.7 years (0.6 to 3.8 years). Twenty five of 63 patients (39.7%) returned to normal values of serum ALT, whereas 38 of 63 (60.3%) still showed abnormal values at six months after IFN therapy completion. Nine of 63 (14.2%) and 6/63 (9.5%) developed cirrhosis and hepatocellular carcinoma, respectively. All patients who developed cirrhosis and hepatocellular carcinoma were from those (n = 38) that showed abnormal ALT values after therapy completion. The five of six patients that progressed to hepatocellular carcinoma were associated with cirrhosis. No patients who returned to normal ALT values developed hepatocellular carcinoma during the period of observation. These results suggest that IFN therapy is effective to prevent the development of hepatocellular carcinoma.