BACKGROUND: The surgical management of hepatocellular carcinoma in patients with well-compensated cirrhosis is controversial. The purpose of the current study was to compare the outcome of patients with well-compensated cirrhosis and early stage hepatocellular carcinoma treated with initial hepatic resection versus transplantation. METHODS: Between 1985 and 2008, 245 patients underwent hepatic resection, and 134 patients underwent liver transplantation for early stage hepatocellular carcinoma. All patients had well-compensated cirrhosis. Prognostic factors were evaluated using univariate and multivariate analyses; survival was calculated using the Kaplan-Meier method. RESULTS: Compared with transplantation, patients undergoing resection had larger tumors and a higher incidence of microscopic vascular invasion. Transplantation was associated with better 5-year disease-free and overall survival compared with resection. Hepatitis status, presence of microscopic vascular invasion, and tumor size were predictors for recurrence, while the presence of microscopic vascular invasion and tumor size conferred an increased risk of death. The disease-free survival advantage with transplantation was more pronounced in hepatitis C patients compared with non-hepatitis and hepatitis B patients. The overall survival advantage with transplantation persisted in cases of solitary lesions < or = 3 cm, but was attenuated in patients with a MELD score < or = 8. CONCLUSION: In well-compensated cirrhotic patients with early stage hepatocellular carcinoma, transplantation was associated with longer disease-free and overall survival. Patients undergoing resection did, however, have tumors with more advanced pathologic features. Patients best suited for initial resection as the treatment of hepatocellular carcinoma were those with a MELD score