Abstract: Primary hepatocellular carcinoma is one of the most prevalent malignancies worldwide, characterized by complex etiology, rapid progression, and a serious threat to human health. Traditional Chinese Medicine (TCM) attributes the development of hepatocellular carcinoma to the interplay of stasis, toxin accumulation, and deficiency. In recent years, the “cancer toxin” theory has gained increasing attention; however, its dynamic formation and evolution remain inadequately elucidated. Based on classical TCM etiology and pathogenesis theory, integrated with modern diagnostic and therapeutic concepts, this study proposes an innovative “cancer toxin-driven and state-target synergy” treatment system. A three-stage dynamic model of pathogenesis transformation-latent pathogen, latent toxin, and cancer toxin-was established to clarify the progression from damp-heat epidemic toxin latency to phlegm-stasis tumor formation and finally to toxin-fire-induced carcinogenesis. Correspondingly, a phased differentiation treatment strategy of “modulating internal state and consolidating the foundation, targeting and removing toxins” is proposed, aiming for comprehensive regulation throughout the disease course: prevention before onset, suppression during development, and stabilization amidst progression. This paper systematically evaluates the efficacy of Shipi Xiaoji Formula-a TCM formula developed under this framework-through analysis of its formulation rationale, experimental mechanism verification, and clinical therapeutic synergy. The study provides theoretical and practical support for TCM-based differentiation and treatment of hepatocellular carcinoma, with promising implications for clinical application.