Hepatitis B virus (HBV) envelope mutants in the region encoding the highly immunogenic major hydrophilic region (MHR) of surface antigen (HBsAg) have been associated with vaccine failure and chronic infection. To determine if these mutants are associated with the development of human hepatocellular carcinoma (HCC), we measured the frequency and nature of such mutants in 23 HBV-associated HCC and various control tissues by performing Southern blot analysis, the polymerase chain reaction (PCR) and direct sequencing. The HBV genome was present mainly in an integrated form and, in most of the samples, the envelope gene was intact. Amino acid substitutions, involving the MHR region in the HCC tissues, were analysed in 11 (61.1%) of 18 patients with HCC. The mutation Gly145Arg, which has been reported to be associated with immunoevasion, was found in seven of the 18 HCC tissues. A significantly higher frequency of mutations was found in HCC tissues (11 of 18) than in the corresponding non-tumorous tissue of the same patients (one of eight), and in samples from patients with acute (one of 19) or chronic (three of 31) HBV infection (P < 0.001, Fisher’s exact test). The accumulation of these envelope mutants in the HCC tissue suggests that such envelope protein mutations may play a role in the process of oncogenesis and that specific vaccines may need to be developed to prevent the occurrence of mutant HBV-associated HCC. Alternatively, the progressive accumulation of mutants in patients with acute hepatitis, chronic hepatitis and HCC may reflect the increased length of duration of HBV infection in these groups of liver lesions.