Sublobular nodules of hepatocytes free of iron or exhibiting much less iron than the surrounding parenchyma, referred to in this study as iron‐free‐foci, are frequently found in the livers of patients with genetic hemochromatosis complicated by hepatocellular carcinoma. To test the hypothesis that such nodules are preneoplastic lesions, iron‐free foci were sought in the initial liver biopsy specimens of 185 patients with untreated and uncomplicated genetic hemochromatosis. Iron‐free foci were found in 14 (7.6%) patients, all men, aged from 38 to 76 yr, with heavy iron overload and with fibrosis or cirrhosis. Twelve patients with iron‐free foci were followed for 0.9 to 15 yr (7 ± 6 yr). In six (50%), HCC developed, compared with 2 (8%) from a control group consisting of 24 patients without IFF matched according to age, sex, degree of fibrosis, liver iron amount and follow‐up duration. The mean number of iron‐free foci per iron‐free foci–positive specimen was 3.2 ± 2.1. Ten patients had dysplastic aspects in their iron‐free foci, and four had intrahepatocytic iron‐positive inclusions at the periphery of iron‐free foci. Proliferative cell nuclear antigen was positive in 75% of iron‐free foci and in 24% ± 21% of hepatocyte nuclei in iron‐free foci. This study clearly demonstrates that iron‐free foci are proliferative lesions and strongly suggests that such nodules are preneoplastic foci. Therefore the finding of IFF in the initial liver biopsy specimen from a patient with genetic hemochromatosis should lead to regular screening for hepatocellular carcinoma. (HEPATOLOGY 1993;18:1363–1369.)