Proliferation of a new population of epithelial cells with distinct structure, as well as cytokeratin and alpha-fetoprotein expression, was observed in nonneoplastic liver tissues from 14 cases (13 hepatitis B virus-positive) of human hepatocellular carcinoma. These cells were characterized by oval nuclei; scant, pale cytoplasm; small cell size; and cross-reaction with a monoclonal antibody against rat oval cells. These putative human oval cells were strongly positive for cytokeratin 19 and displayed considerable heterogeneity in alpha-fetoprotein and albumin expression. The oval cells were most prominent in actively regenerating nodules and in liver tissue surrounding the cancer. Oval cells and transitional types of cells appear to be the principal producers of alpha-fetoprotein in the regenerating liver. Cancer cells positive for cytokeratins 8, 18 and 19 were observed in half the hepatocellular carcinomas studied. The data suggest that a new cell population structurally similar to oval cells seen in early stages of chemical hepatocarcinogenesis in rats is consistently present in regenerating liver lesions associated with human hepatocellular carcinoma. Furthermore, it is possible that the proliferation of these oval-type cells may partly account for the elevation of serum alpha-fetoprotein frequently seen in precancerous stages of hepatitis B virus-associated human hepatocellular carcinoma.