BACKGROUND/AIMS: Dysregulation of the cell cycle is frequently associated with tumor development. Hepatitis B virus (HBV) is associated with a significant risk of developing hepatocellular carcinoma but the effects of HBV on cell cycle regulation are not completely understood. METHODS: We have used a recombinant adeno-HBV model system to investigate the effect of infection with HBV and the replication defective lamivudine resistant mutant rtM204I mutant on hepatocyte cell cycle and cell viability. RESULTS: Huh7 cells synchronised at the G1/S phase of the cell cycle were arrested at the G2/M following infection with rAdHBV-wt and rAdHBV-M204I. This was accompanied by increased levels of p21(cip1), p-cdc2, cyclins D, A and B. Cell viability was reduced and cleaved caspase 3 levels were increased in HBV- and rtM204I-infected cells. rAdHBV-M204I-infected Huh7 cells also demonstrated significant up-regulation of phospho-ERK, phospho-Akt, p53 and phospho-Mdm2 compared to mock-infected cells. These changes were comparable to those following infection of Huh7 cells with rAdHBV-wt. CONCLUSION: Our results suggest that HBV, regardless of phenotype, produces cell cycle arrest and reduced hepatocyte viability. Perturbations in these cellular processes are likely to underlie HBV-associated liver oncogenic transformation and may help explain the ongoing risk of developing hepatocellular carcinoma in individuals in whom the lamivudine resistant rtM204I mutant emerges.