An assumption of previous models of hepatic elimination is that there is negligible axial diffusion in the liver. We show, by construction of a stochastic model and analysis of published data, that compounds which are readily diffusible and partitioned into hepatocytes may undergo axial tissue diffusion. The compounds most likely to be affected by axial tissue diffusion are the lipophilic drugs for which the cell membranes provide little resistance and which are highly extracted, thereby creating steep concentration gradients along the sinusoid at steady state. This phenomenon greatly modifies the availability of the compound under conditions of altered hepatic blood flow and protein binding. For moderately diffusible compounds, these relationships are similar to those predicted by the simplistic venous-equilibrium model. Hence, the paradoxical ability of the venous-equilibrium model to describe the steady-state kinetics of lipophilic drugs such as lidocaine, meperidine, and propranolol may be finally resolved. The effects of axial tissue diffusion and vascular dispersion on hepatic availability of drugs are compared. Vascular dispersion is of major importance to the availability of poorly diffusible compounds, whereas axial tissue diffusion becomes increasingly dominant for highly diffusive and partitioned substances.