Precore/core genes from hepatitis B e antigen (HBeAg)-positive and antibody to HBeAg (anti-HBe) positive individuals with active hepatitis have been analyzed to search for correlations with response to interferon before and after treatment. Pretreatment, no precore stop codon mutants were detected, even at the 3% level, in HBeAg-positive responders or nonresponders. In anti-HBe-positive patients, precore mutants did not influence response. No significant core amino acid variability was observed in HBeAg-positive patients, irrespective of interferon response. However, anti-HBe-positive cases had multiple core protein substitutions, mostly in B- and T-helper cell epitopes, but responders had fewer (P = .02 for responders versus nonresponders and reactivators). None of four responders, three of seven reactivators, and three of three nonresponders had mutations within the major T-helper epitope from aa50 to aa69 (P = .03). Precore mutants appeared in eight of nine natural seroconverters compared with 3 of 10 interferon-induced anti-HBe seroconverters (P = .01). Those in whom precore wild-type remained after treatment often tested negative in the last available sample using polymerase chain reaction (PCR), whereas emergence of mutants led to ongoing viremia in all cases. In anti-HBe-positive cases, precore sequences remained stable during therapy, except for 2 cases in whom a precore mutant appeared accompanied by reactivation. In the core protein, anti-HBe-positive cases selected a mean of 3.5, 1.6, and 1.7 amino acid substitutions in responders, nonresponders, and reactivators respectively (P = NS). In conclusion, core but not precore sequence before therapy may predict response. Appearance of precore mutants during therapy usually predicts failure to clear virus but substitution in core does not influence outcome. (Hepatology 1995; 22:1355-1362).