Alkylation of DNA at the O(6) position of guanine is a critical step in the induction of mutations by carcinogenic and chemotherapeutic alkylating agents. O(6)-methylguanine-DNA methyltransferase (MGMT) is an enzyme that removes mutagenic adducts from the O(6) position of guanine, thereby protecting the genome against guanine to adenine transitions. We hypothesized that alteration in MGMT expression might occur in early stages of development of oral cancer and be associated with disease progression. Immunohistochemical analysis of MGMT expression was carried out in 107 oral squamous cell carcinomas (OSCCs), 78 oral precancerous lesions (OPLs) (58 hyperplasias and 20 dysplasias) and 30 histologically normal oral tissues and correlated with clinicopathological parameters as well as major risk factors. Decreased MGMT expression was observed as early as in hyperplasia (p=0.003; Odd's Ratio (OR)=5.0). Significant loss of MGMT expression was observed from hyperplasia to dysplasia (p=0.034; OR=4.0). Loss of MGMT expression was associated with late clinical stage of OSCCs (p=0.027, OR=2.0) and nodal metastasis (p=0.031, OR=2.5). Decreased MGMT expression was associated with smokeless tobacco (ST) consumption in patients with OPLs (p=0.017, OR=3.6) and OSCCs (p=0.031, OR=2.8). Significant association was also observed between loss of MGMT expression and poor prognosis of OSCC patients (p=0.02; OR=5.2). The decreased MGMT expression in OPLs suggested that deregulation of MGMT expression is an early event in the development of oral cancer. In OSCCs, its correlation with late clinical stage, and nodal metastasis suggests association with aggressive tumor behavior and cancer progression, underscoring its potential as a candidate predictive marker for nodal metastasis and disease prognosis. Correlation of loss of MGMT expression with ST consumption underscored its significance in ST-associated oral carcinogenesis.