Hepatitis B virus (HBV) infection is a major global health concern and is the most common cause of chronic liver disease worldwide. The natural history and clinical outcomes of chronic HBV infection are determined by the viral replication cycle and the host immune responses. Treatment of chronic hepatitis B is directed at interrupting the natural history by suppressing HBV replication before development of any significant irreversible liver cell damage. Effective antiviral therapies should be followed by sustained suppression of HBV-DNA, normalization of transaminases levels and a stable stage of HBeAg seroconversion with persistence of circulating anti-HBeAg antibodies. Two major classes of antiviral therapeutic agents that have been approved for treatment of chronic hepatitis B are immunomodulating agents (i.e. interferon) and the nucleoside analogs (i.e. lamivudine). A 4–6 month course of interferon-α has resulted in improvement of survival in 20%–30% of patients with chronic hepatitis B who had elevated serum ALT levels without hepatic decompensation. Interferon-α therapy is associated with HBeAg seroconversion; normalization of ALT levels, reduced hepatic inflammation, and possibly reduced disease progression to cirrhosis and hepatocellular carcinoma. Interferon can also be used with caution in patients with early compensated cirrhosis. A 12-month course of lamivudine has been shown to be well tolerated and effective. Lamivudine can be used in decompensated cirrhosis and immunosuppressed patients and for prevention of recurrent HBV infection after liver transplantation. The response rates after 3 years of lamivudine therapy account for 40–65%. A major problem of antiviral treatment is the emergence of drug resistance conferred by mutations in the YMDD motif of HBV reverse transcriptase. The prevalence of YMDD mutations increases with longer durations of antiviral therapies and this has been detected in 20% of immunocompetent patients receiving lamivudine per year. Contentious issues remain when to stop the treatment if HBeAg seroconversion does not occur. Many new immunomodulatory therapies and antiviral agents are in various stages of clinical development and have shown some promise. Among newer HBV antivirals, adefovir dipivoxil, entecavir, emtricitabine, DAPD and clevudine appear to be at least as potent as lamivudine in suppressing HBV replication. In vitro studies have shown that YMDD mutations confer cross-resistance between lamivudine and emtricitabine. However, adefovir, dipivoxil, lobucavir, DAPD and possibly clevudine suppress replications of both YMDD mutants and wild types of HBV. Immunomodulatory approaches for treatment of chronic hepatitis B are conceptually attractive, but newer agents used to date (thymosin-α, interleukin-12, therapeutic vaccines) have not demonstrated sufficient efficacy for widespread use. Combinations of an immunomodulatory agent and nucleoside analog may improve the therapeutic efficacy and reduce the emergence of drug resistance. Nevertheless, combinations of interferon and lamivudine therapies do not confer such additional benefits. The next challenge for HBV treatment is to use antivirals in combination and/or in cyclical therapy to minimize the emergence of drug resistance and increase efficacy, particularly to achieve sustainable post-treatment suppression of HBV. Randomized prospective control trials of combined antiviral therapies given simultaneously or sequentially are needed to establish safe and effective combined regimens that can be recommended for future treatment strategies.