Advances in clinical medical imaging have brought about the routine production of vast numbers of medical images that need to be analyzed. As a result an enormous amount of computer vision research effort has been targeted at achieving automated medical image analysis. Computed Tomography (CT) is highly accurate for diagnosing liver tumors. This study aimed to evaluate the potential role of the wavelet and the neural network in the differential diagnosis of liver tumors in CT images. The tumors considered in this study are hepatocellular carcinoma, cholangio carcinoma, hemangeoma and hepatoadenoma. Each suspicious tumor region was automatically extracted from the CT abdominal images and the textural information obtained was used to train the Probabilistic Neural Network (PNN) to classify the tumors. Results obtained were evaluated with the help of radiologists. The system differentiates the tumor with relatively high accuracy and is therefore clinically useful.