Gastric dysplasia is regarded as a pre-neoplastic lesion and is generally believed to have higher potential for malignant transformation with increasing grade. To obtain consistency in diagnosis and management, reproducible diagnostic criteria are needed. We have used the classification system of the International Study Group on Gastric Cancer--ISGGC and investigated the interobserver variation in histological diagnosis. A Kappa statistic of 0.579, which reflects moderate agreement, was obtained for variation between two experienced pathologists. The prevalence of type III intestinal metaplasia was studied and found to occur in 55% of dysplastic areas, but in only 9% of hyperplastic areas (P less than 0.01). In addition, the correlation of mean nucleolar organizer region (AgNOR) counts with diagnostic categorization was investigated. A significant inter-observer variation was found between an experienced pathologist and a postgraduate student and only one of the observers obtained statistically significant separation of mean AgNOR counts between the categories of high-grade dysplasia, low-grade dysplasia, atypical hyperplasia, simple hyperplasia and normal.