A system and method for preparing and conditioning a heavy oil feedstock for hydroprocessing in a hydroprocessing system includes forming metal sulfide catalyst particles in situ within the heavy oil feedstock. The metal sulfide catalyst particles are formed in situ by (1) premixing a catalyst precursor with a hydrocarbon diluent to form a diluted precursor mixture, (2) mixing the diluted precursor mixture with the heavy oil feedstock to form a conditioned feedstock, and (3) heating the conditioned feedstock to decompose the catalyst precursor and cause or allow metal from the precursor to react with sulfur in the heavy oil feedstock to form metal sulfide catalyst particles in situ in the heavy oil feedstock. The in situ formed metal sulfide catalyst particles catalyze beneficial upgrading reactions between the heavy oil feedstock and hydrogen and eliminates or reduces formation of coke precursors and sediment.