The genetic diversity of hepatitis B virus (HBV) strains has evolved through mutations such as point mutations, deletions or insertions, and recombination. We identified and characterized a novel type of mutation which is a complex of external insertion, deletion, and internal duplication in sequences from one of six patients with chronic hepatitis B virus genotype E (HBV/E). We provisionally named this mutation a "replacement mutation"; the core promoter upstream regulatory sequence/basic core promoter was replaced with a part of the S1 promoter covering the hepatocyte nuclear factor 1 (HNF1) binding site, followed by a tandem repeat of the HNF1 site. A longitudinal analysis of the HBV population over 6 years showed the clonal change from wild-type HBV/E to replacement-mutant type, resulting in a lower hepatitis B (HB) e antigen titer, a high HBV DNA level in serum, and progression of liver fibrosis. In an in vitro study using a replication model, the replacement-mutant HBV showed higher replication levels than the wild-type HBV/E replicon, probably mediated by altered transcription factor binding. Additionally, this HNF1 site replacement mutation was associated with excessive HB nucleocapsid protein expression in hepatocytes, in both in vivo and in vitro studies. This novel mutation may be specific to HBV genotype E, and its prevalence requires further investigation.