Nucleos(t)ide analogue antiviral therapy for chronic hepatitis B has proven to be effective in the short term but the frequent development of resistance limits its clinical utility. Agents targeting other stages of viral replication are needed in order to develop improved combination therapies. The phenylpropenamide derivatives AT-61 and AT-130 have been shown to inhibit HBV replication in vitro, but the mechanism of action of these compounds remains undefined. The aim of this study was to determine the mechanism of action of AT-130, a non-nucleoside inhibitor of HBV in several in vitro models of replication. These studies found that AT-130 inhibited HBV DNA replication in hepatoma cells but had no effect on viral DNA polymerase activity or core protein translation. Total HBV RNA production was also unaffected in the presence of the drug whilst the amount of encapsidated RNA was significantly reduced, thereby inhibiting subsequent viral reverse transcription. These studies have established that the inhibition of HBV genome replication by a non-nucleoside analogue acting at the level of viral encapsidation and packaging is a potentially useful strategy for future therapeutic drug development in the management of chronic hepatitis B.