The regulation of the core promoter of Hepatitis B virus (HBV) was investigated using the chloramphenicol acetyltransferase (CAT) reporter system. Deletional analysis of sequences 5' to the HBV core promoter indicated the presence of a negative regulatory element (NRE) located within a 282-bp BamHI-HincII DNA fragment. The NRE was functional in hepatic as well as nonhepatic cells. Results of in vivo competition experiments suggest a role for cellular transacting repressor protein(s) in the functioning of the NRE. The HBV NRE, positioned 5' to the SV40 early promoter, inhibited the activity of the heterologous promoter in an orientation-independent, but position-dependent manner. These data indicate that the HBV NRE is a silencer element, which functions to downregulate the activity of the core promoter.