Thirty patients with cystic disease of the bile ducts operated on between 1965 and 1985 were reviewed. Three patients (10%) had a synchronous adenocarcinoma, and in three patients (10%) a metachronous carcinoma developed for a total incidence of malignancy of 20%. All patients died within 1 year of the diagnosis of malignancy. Of 19 benign cysts available for pathologic examination, one third had proliferative epithelial changes, and in two of these patients a metachronous carcinoma developed. Goblet cell metaplasia was prominent in four patients. This suggests the possibility that dysplastic changes and metaplasia of the epithelium could give rise to carcinoma. Resection of benign cysts of the bile ducts is favored, when feasible, in an attempt to decrease the incidence of malignancy.