Hepatocyte turnover rates were studied in two lineages of transgenic mice that overproduce the hepatitis B virus (HBV) large envelope protein and retain filamentous hepatitis B surface antigen (HBsAg) particles in the endoplasmic reticulum, resulting in the formation of ground glass hepatocytes. The high producer lineage (50-4) develops a necroinflammatory liver disease that progresses to hepatocellular carcinoma (HCC), whereas the low producer lineage (107-5) displays no histopathologic changes other than ground glass hepatocytes. Bromodeoxyuridine (BrdU)-labeling studies of S-phase hepatocytes provide quantitative evidence for a strong, sustained proliferative response in the hepatocytes in lineage 50-4 that occurs after the onset of hepatocellular injury but long before the development of liver cell tumors. In contrast, the level of hepatocellular proliferation in lineage 107-5 is the same as nontransgenic controls. The findings support the concept that sustained hepatocellular proliferation plays an important role in the development of hepatocellular carcinoma (HCC).