Laboratory findings are presented for the dispersion process of water-soluble dispersed catalyst and the slurry-phased hydrocracking of Liaohe vacuum residue (LHVR). Optical microscopy was adopted to characterize the dispersion process, and the impacts of various factors on the process were studied by means of the particle size,distribution (PSD) of catalysts, which was obtained from the micrographs using the Image Pro Plus image analysis program. Effects of the dispersion on LHVR conversion and coke formation were then investigated in an. autoclave simulating slurry-phase hydrocracking. The results indicated that the dispersion of catalyst is significantly improved by reducing the interfacial tension between the precursor solution and the feedstock, and the yield of lighter fraction (gas and gasoline), coke, content of asphaltene in bottom from products, and conversion of condensation reaction decrease to follow the decreasing interfacial tension. That is, higher dispersion of the catalyst could enhance the catalyses ability to inhibit in-depth condensation and excessive cracking. Higher stirring rate could promote the dispersion of catalyst and its ability in the low range, but there is a critical stirring rate. Lowering concentration of the precursor solution is slightly conducive to improving the dispersion of catalyst and its ability, but the degree of enhancement is more minor compared with the interfacial tension.