Administration of diethylnitrosamine I.P. at dose level of 2 mg/kg five days a week to young Sprague-Dawley rats induced foci of altered hepatocytes entirely devoid of glucose-6-phosphatase and adenosine triphosphatase activity. Several weeks later, these foci developed hepatocellular carcinoma mostly of the trabecular type. Although these "preneoplastic" altered cells appeared as normal hepatocytes when examined in HE-sections, they were found to exhibit sites of dedifferentiation with ultrastructural features of hepatoma cells. Early morphological changes indicative of neoplastic transformation took place first as excessive storage of glycogen then as marked alterations at the surface membranes of such cells. Striking increase in coated pinocytotic vesicles appeared along the apposing cell membranes associated with loss of sinusoidal microvilli, protrusion of cytoplasmic blebs in the intercellular spaces, reduction or loss of desmosomes and obliteration of bile canaliculi. Subsequent changes were seen as dilation and disruption of the rough endoplasmic reticulum (RER), dispersal of ribosomes, proliferation and clustering of the smooth endoplasmic reticulum (SER), predominance of annulate lamellae, depletion of glycogen, enlargement of the Golgi cisterns and segregation of nucleolar elements. After 20 weeks, rats given DENA at a dose level of 25 mg/kg twice a week developed pronounced cirrhotic nodules in addition to multiple hepatocellular carcinoma. In contrast to the neoplastic nodules, the cirrhotic ones retained normal activity of glucose-6-phosphatase and adenosine triphosphatase and exhibited ultrastructural features typical of normal hepatocytes.