Although alpha interferon (IFN-alpha) is of benefit in the treatment of viral hepatitis B, HBV replication has been refractory to the cytokine in commonly used hepatocyte-derived cell lines. In search for a cell culture system to study the mechanism by which IFN-alpha inhibits HBV replication, we infected a variety of cell lines with an adenoviral vector containing a replication competent 1.3-fold genome length HBV DNA (AdHBV) and followed by incubation with IFN-alpha. We found that IFN-alpha efficiently decreased the level of HBV DNA replicative intermediates in AdHBV infected Madin-Darby bovine kidney (MDBK) cells. Further analysis revealed, surprisingly, that IFN-alpha did not directly inhibit HBV replication, rather the amount of adenovirus DNA in the nuclei of MDBK cells was reduced. As a consequence, HBV RNA transcription and DNA replication were inhibited. Experiments with adenoviral vector expressing a green fluorescent protein (GFP) further supported the notion that IFN-alpha treatment noncytolytically eliminated adenovirus DNA, but did not kill the vector infected MDBK cells. Our data suggest that IFN-alpha-induced antiviral program is able to discriminate host cellular DNA from episomal viral DNA and might represent a novel pathway of interferon mediate innate defense against DNA virus infections.