The human hepatitis B Virus genome (HBV) contains a liver-specific enhancer upstream of the X ORF which has been studied in detail by several investigators. A second liver-specific enhancer element, designated here as enhancer II, has been relatively recently described in the HBV genome, which is located within the core/pregenomic promoter. We have studied the interactions of transcriptional factors with this element and show here that the nuclear factor CCAAT/enhancer binding protein (C/EBP) binds at a unique site within these sequences. Further, using the transient cotransfection scheme of expression with C/EBP encoding vectors and an enhancer II-reporter gene construct, we demonstrate that the enhancer element II responds to increasing amounts of C/EBP by displaying transactivation. Evidence for the functional role of the enhancer element II in transcriptional regulation of the HBV gene expression is presented. A major influence of the enhancer II appears to be on the surface antigen expression.