To elucidate cell differentiation in liver carcinogenesis, we have studied the CCAAT/enhancer-binding protein (C/EBP). C/EBP is a positive-acting transcription factor important for the maintenance of liver-specific functions. It is associated with differentiation and regarded as an anti-proliferative agent. We have studied the expression and localization of C/EBP during sequential rat liver carcinogenesis. Two-color immunohistochemistry and confocal laser scan microscopy demonstrated C/EBP in hepatocyte nuclei and preneoplastic liver lesions, but not in bile ducts, non-parenchymal cells or oval cells. Both western blotting and immunohistochemistry revealed down-regulation of C/EBP during normal regeneration and when regeneration was inhibited by the carcinogen, 2-acetylaminofluorene. A similar down-regulation was shown by western blotting in hepatocytes grown in culture. Our data suggest that the altered metabolic phenotype of preneoplastic liver lesions was not caused by a change in the expression of C/EBP. Furthermore, the data favor a hepatocyte derivation of preneoplastic liver lesions.