This study investigates the role of the immune system in the pathogenesis of hepatic injury during hepatitis B virus infection. A transgenic mouse line containing the gene sequences for the hepatitis B virus envelope region (pre-S1, pre-S2, and HBs Ags) ligated to mouse albumin regulatory sequences was developed. Mice of this lineage did not contract spontaneous liver disease and were immunologically tolerant to pre-S and HBs Ags. Nontransgenic mice of the same lineage were immunized with a recombinant vaccinia virus containing the coding region for the HBs polypeptide. Spleen cells from immunized mice were transferred into the transgenic mice. The recipient transgenic mice exhibited prompt falls in serum HBsAg, appearance of serum anti-HBsAg and biphasic patterns of serum ALT elevation. The first rise in serum ALT (3 to 7 days after spleen cell transfer) appeared to be due to antibody-mediated cell injury because it could be reproduced by administration of serum from immunized, nontransgenic mice to transgenic mice. The second rise in ALT, at 14 to 21 days, occurred long after disappearance of serum HBsAg and was associated with histological evidence of liver cell necrosis and infiltration of the liver by lymphocytes. In other experiments, the pattern of delayed injury was reproduced by transfer of specific cytotoxic Lyt 2+ (CD8) T cells from immunized nontransgenic mice to transgenic mice, suggesting a role for cytotoxic T lymphocyte—mediated immune injury. Further studies using a cytotoxic T lymphocyte cell line specifically sensitized to HBsAg suggested that (a) cytotoxicity was specifically directed against cells that expressed a small region of the HBsAg; (b) cytotoxicity was major histocompatibility complex—restricted (i.e. cells expressing HBsAg but not identical major histocompatibility complex antigens were not killed); (c) cytotoxicity was enhanced if target cells were pretreated with γ-interferon, which presumably enhances expression of major histocompatibility complex antigens; and (d) cytotoxicity and liver cell injury could be reproduced in vivo by transfer of HBsAg-directed cytotoxic T cell lines back into transgenic mice (which express hepatitis B antigens). In summary, transgenic mice were raised that expressed HBV-encoded antigens at the hepatocyte surface in a form recognizable by both major histocompatibility complex class I—restricted cytotoxic T lymphocytes and envelope-specific antibodies. The resultant liver cell injury indicates that chronic HBV infection may be mediated by antigenspecific, cell-mediated responses. Finally, these studies also suggest a role (perhaps minor) for viral antibodies in hepatocyte injury.