Early detection of hepatocellular carcinoma (HCC) has become easier with recent advances in imaging diagnosis, but the tumor is frequently unresectable due to underlying advanced liver cirrhosis. In this study, we evaluated the therapeutic effect of percutaneous ethanol injection therapy (PEIT) and transarterial chemoembolization therapy (TACE) for small liver cancers measuring 3 cm or less in diameter and discussed the treatment of choice for unresectable cases. The tumors were divided into two groups on the basis of size: 1.5 cm or less (group A) and 1.6-3 cm in diameter (group B). In group A, the estimated 1- and 3-year survival rates were both 82% for a total of 19 cases. The survival value determined for 10 patients treated with PEIT was slightly higher than that found for 9 patients treated with TACE. In group B, the overall 1-, 2-, and 3-year survival values for a total of 56 patients were estimated at 83%, 60%, and 35%, respectively. The survival rates for 41 patients treated with TACE were 82%, 53%, and 28% at 1, 2, and 3 years, respectively. PEIT was performed on only 6 patients, whose survival rate was equivalent to that of a surgical resection group. The 1-, 2-, and 3-year survival rates for 9 patients who underwent surgical resection were estimated to be 100%, 85%, and 68%, respectively. Based on these results, PEIT seems to be the treatment of first choice for patients with small liver cancers measuring less than 1.5 cm in diameter if the tumor is thought to be unresectable because of associated severe liver cirrhosis. On the other hand, tumors measuring 1.6-3 cm in diameter must first be treated with TACE using a long-acting Lipiodol-carcinostatic suspension, even if resectable. In addition to the tumor size, dynamic CT is also useful for prospective decision of the therapeutic strategy. If the mass is demonstrated to be a hypervascular lesion by dynamic CT, TACE must be selected as the treatment of first choice, even for small lesions measuring 1.5 cm or less in diameter.