We compared laparoscopy with histology in identifying fatty change, fibrosis, the degree of inflammatory activity, cirrhosis and the cause of liver disease. Laparoscopic liver biopsy was performed in 145 consecutive patients. The laparoscopist and the histologist were provided with similar clinical and biochemical information. Both scored the appearances on respective examinations for the degree of fatty change, fibrosis and activity, presence or absence of cirrhosis; and provided a provisional diagnosis. The final diagnosis was determined by clinicopathological conference and clinical follow-up. Laparoscopy was successfully performed in 142 patients (97.9%). Compared with histology, the sensitivity and specificity of laparoscopy for identifying fatty change were 96.4% and 100%, 100% and 95% for fibrosis and 94% and 95% for inflammatory activity, respectively. For cirrhosis, laparoscopy was 100% sensitive and 97.1% specific. Histology missed 10 cases of cirrhosis (6.1%). Histology did, however, provide additional information in 9 patients (6.3%) which contributed to the final diagnosis. Overall, histology is required in addition to laparoscopy in cases where the aetiology is unclear. The sensitivity and specificity in identifying fatty change, fibrosis, activity and cirrhosis are similar for laparoscopy and histology. The combination of information gained on laparoscopy with histology provides the diagnosis in most patients. Laparoscopy may replace the need for liver biopsy in patients in whom the aetiological diagnosis is not in question and the biopsy is being performed to stage the disease. We used it as an integral part of the work-up of a patient with liver disease.