Hepatocellular carcinoma (HCC) usually occurs at the late stage of chronic liver injury. Oncostatin M (OSM) is a tumor-associated cytokine highly expressed in cirrhosis and HCC patients; however, its role in hepatocarcinogenesis has not been clearly elucidated. In this study, we investigated the effect of OSM on HCC occurrence in a rat model of N-diethylnitrosamine-induced HCC. OSM overexpression significantly increased the number of tumor nodules and shortened the overall survival of the rats. Notably, OSM promoted HPC activation in vivo but did not directly regulate the proliferation of the HPC cell line in vitro. Further, OSM induced tumor necrosis factor-α (TNF-α) secretion and CD68 macrophage accumulation, which were positively correlated with HPC activation. Additionally, TNF-α or macrophage depletion inhibited the promoting effect of OSM on hepatocarcinogenesis and HPC activation. Furthermore, OSM expression in the peritumoral tissues of HCC was positively correlated with poor overall survival of patients. In conclusion, OSM plays an important role in hepatocarcinogenesis by regulating the liver inflammation environment. Hence, OSM could be used as a potential target for HCC prevention and therapy or as an indicator of HCC prognosis.