The role of fine needle aspiration biopsy (FNAB) in the evaluation of focal liver lesions has evolved. Guided FNAB is still useful to procure a tissue diagnosis if clinical, biochemical and radiologic findings are inconclusive. Major diagnostic issues include: (i) Distinction of benign hepatocellular nodular lesions from reactive hepatocytes, (ii) Distinction of well-differentiated hepatocellular carcinoma (WD-HCC) from benign hepatocellular nodular lesions, (iii) Distinction of poorly differentiated HCC from cholangiocarcinoma and metastatic carcinomas, (iv) Determination of histogenesis of malignant tumor, and (v) Determination of primary site of origin of malignant tumor. This review gives a general overview of hepatic FNAB; outlines an algorithmic approach to cytodiagnosis with emphasis on HCC, its variants and their mimics; and addresses current diagnostic issues. Close radiologic surveillance of high-risk cirrhotic patients has resulted in the increasing detection of smaller lesions with many subjected to biopsy for tissue characterization. The need for tissue confirmation in clinically obvious HCC is questioned due to risk of malignant seeding. When a biopsy is indicated, core needle biopsy is favored over FNAB. The inherent difficulty of distinguishing small/early HCC from benign hepatocellular nodular lesions has resulted in indeterminate reports. Changing concepts in the understanding of the biological behavior and morphologic evolution of HCC and its precursors; and the current lack of agreement on the morphologic criteria for distinguishing high-grade dysplastic lesions (with small cell change) from WD-HCC, have profound impact on nomenclature, cytohistologic interpretation and management. Optimization of hepatic FNAB to enhance the yield and accuracy of diagnoses requires close clinicopathologic correlation; combined cytohistologic approach; judicious use of ancillary tests; and skilled healthcare teams.