Diabetes mellitus and hepatocellular carcinoma both have detrimental impact on health worldwide. Type II diabetes and liver cancer share many causative factors, but biological correlation between the two diseases still remains elusive. The study was aimed to evaluate the effect of induction of diabetes during the development of hepatocarcinogenesis in rats. Rats were divided into four groups namely, normal control, diabetic control, carcinogen control and carcinogen treated rats treated with streptozotocin (to make them diabetic). Hepatocarcinogenesis was initiated in rats by diethylnitrosamine (200 mg kg

− 1 body weight, single ip injection on day 0 only). Then 2-acetylaminoflourene (0.5% w/w) was given daily in diet for 18 weeks to promote the carcinogenesis. On the 16th week, streptozotocin (65 mg kg

− 1 body weight, single ip injection) was administered to initiate diabetes in rats. On the 20th week, animals were sacrificed and various biochemical changes and histopathological alterations in liver were investigated. Carcinogen treated rats made diabetic had significantly lower cytochrome P-450 content as compared to diabetic control rats and had slightly elevated cytochrome P-450 level as compared to that of carcinogen control rats. Marked enhancements of UDP-glucuronosyl transferase, glutathione S-transferase activities and lipid peroxidation levels were observed in carcinogen treated rats made diabetic as compared to those activities and levels in diabetic control and carcinogen control rats. Histopathological investigation of hepatic tissue has favoured the rapid progress of development of hepatocellular carcinoma in carcinogen treated rats made diabetic. In conclusion, induction of diabetes during the development of hepatocellular carcinogenesis inevitably promotes the progression of the later disease.