Hepatocellular carcinoma (HCC) is one of the most common malignancies worldwide and is highly associated with chronic liver disease, including hepatitis B viral infection. In order to study the association between hepatitis B virus (HBV) infection and HCC development, tissue microarrays were used to detect the expression of hepatitis B surface antigen (HBsAg) in 194 HCCs and their surrounding liver tissues, using anti‐HBsAg monoclonal antibody. The results showed that the expression of HBsAg is significantly lower in tumour tissue than in non‐tumour tissue. Among the 138 cases with positive serum HBsAg, expression of HBsAg was more frequently detected in non‐tumour tissue (103 cases, 75%) than in tumour tissue (11 cases, 8%). RT‐PCR and Southern blot analysis were performed to explore the mechanism of the decreased expression of HBsAg in tumour cells. The RT‐PCR results showed that absence or decreased expression of the HBV S gene was detected in 3/15 (20%) and 6/15 (40%) HCCs, respectively. Integration of HBV in 23 pairs of HCCs and their matched non‐tumour liver tissues was studied by Southern blot. The results showed that the integrated HBV S gene sequence was detected in 19/23 tumours (83%) and 1/23 non‐tumour tissues (4%), whereas the free replicative virus form was observed in 3/23 tumours (13%) and 14/23 non‐tumour tissues (61%). These findings suggest that HBsAg‐negative results in tumour tissues were directly related to HBV DNA insertion and provide new insights into the involvement of HBsAg in hepatocarcinogenesis. Copyright © 2002 John Wiley & Sons, Ltd.