Purpose To establish a method of assessing the malignant potential of hepatocellular carcinoma (HCC) using magnetic resonance imaging (MRI). Methods For 69 nodules [12 Edmondson (Ed)-I, 48 Ed-II, 9 Ed-III] in 54 HCC patients, signal intensity patterns and enhancement patterns of gadopentate dimeglumine (Gd-DTPA) dynamic studies were correlated with histological differentiation and serum lens culinaris agglutinin-reactive alpha-fetoprotein (AFP-L3) level, which is an indicator of poor prognosis. Results Hypointensity on T1-weighted imaging was seen in 17, 72, and 89% of Ed-I, Ed-II, and Ed-III HCCs, respectively (P \ 0.001). Meanwhile, hyperintensity on T2-weighted imaging was seen in 42, 88, and 89% (P \ 0.005). Tumor stain during the arterial phase of Gd dynamic MRI was seen in 75, 86, and 89%. Tumor stain washout during the portal phase was seen in 43% of Ed-II and 100% of Ed-III HCCs (P \ 0.005). In the Ed-II and Ed-III HCCs, hypointensity on T1-weighted imaging was seen in 65% of AFP-L3-negative HCCs and 90% of AFP-L3-positive HCCs (P = 0.071). Washout of tumor stain during the portal phase was seen in 39% of AFP-L3-negative HCCs and 75% of AFP-L3-positive HCCs (P \ 0.05). Conclusions Although hyperintensity of tumor on T2-weighted imaging and arterial hypervascularity of tumor are considered to be useful for differential diagnosis between well differentiated HCCs and moderately/poorly differentiated HCCs, hypointensity of tumor on T1-weighted imaging and tumor stain washout during the portal phase of Gd-DTPA dynamic MRI reflected poorer histological differentiation of HCCs and correlated with AFP-L3 levels.