Abnormality of the p16 expression is involved in the pathogenesis of hepatocellular carcinoma (HCC), and hypermethylation of p16 gene is known as a major p16 inactivation mechanism. Cirrhotic nodule (CN) is now regarded as a preneoplastic lesion that is frequently associated with microscopic foci of HCC through dysplastic nodules (DNs). This observation clearly supports a multistep hepatocarcinogenesis from CNs through DNs. We thus examined the methylation status of p16 gene in HCCs surrounded by DNs and CNs to define the significance of p16 hypermethylation in the early stage of hepatocarcinogenesis. We tested 24 hepatitis B virus (HBV)-associated CNs, 37 DNs, and 18 HCCs within DNs that were microdissected from paraffin-embedded tissue sections. Frequency of p16 hypermethylation was significantly high in HCCs within DNs (15/18. 83.3%) and it increased from CNs (15/24. 62.5%) through DNs (26/37, 70.3%). Interestingly, 11 out of 12 (91.7%) HCC associated with methylation-positive DNs revealed hypermethylation of p16, and 18 out of 23 (78.2%) DNs associated with methylation-positive CNs showed p16 hypermethylation. These data suggest that p16 hypermethylation in the early stages, CNs and DNs may predispose to HCC. In addition, p16 methylation status of five cell lines with or without HBV infection was examined to test whether the high frequency of hypermethylation is related to HBV infection. HBV-infected cell lines were exclusively methylation-positive. These data suggest that high frequency of hypermethylation may be associated with hepatitis B virus infection.