Studies in experimental animals suggest that low folate levels may play a role in liver damage and hepatocarcinogenesis. To examine this association in humans, folate levels in blood and risk for subsequent liver damage and hepatocellular carcinoma (HCC) were assessed in a population at high risk of liver cancer in China. Four hundred fifteen hepatitis B surface antigen-positive participants of the Haimen City Cohort were prospectively followed between 1998 and 2002. Serum and RBC folate levels were determined at baseline. Alanine aminotransferase (ALT) and hepatitis B virus DNA levels were measured semiannually. Logistic regression modeling was used to examine the presence of hepatitis B virus DNA and HCC, whereas linear regression with a log-link function was used to examine ALT levels. There was a statistically significant inverse association between serum folate level and ALT level. ALT levels decreased with each quartile increase in serum folate (adjusted odds ratio, 0.86; 95% confidence interval, 0.76-0.97 for the highest compared with the lowest quartile; Ptrend = 0.002). After exclusion of three persons with prevalent HCC, 20 (4.9%) of the 412 study participants developed HCC during follow-up, with a median time between enrollment and HCC diagnosis of 2.66 years (interquartile range, 1.8-4.1). When comparing persons in the lowest quartile RBC folate to persons in all other quartiles, the analysis found that higher RBC folate levels were associated with reduced risk of hepatocarcinogenesis (odds ratio, 0.33, 95% confidence interval, 0.13-0.86; P(trend) = 0.02). This study suggests that increased folate levels in humans may be inversely associated with the development of liver damage and HCC.