The identity of the trans-acting factor encoded by the 1,828-bp BamHI DNA fragment of hepatitis B virus (HBV) that suppresses the transcription of the human beta interferon gene was investigated. Each complete and partial open reading frame (ORF) present within the 1,828-bp BamHI HBV DNA fragment was cloned into a simian virus 40 expression vector, and the resulting gene products were assayed for their ability to inhibit the activity of the regulatory DNA region that governs the expression of the beta interferon gene. Only the proteins encoded by the C ORF inhibited the activity of the beta interferon regulatory DNA region; putative proteins encoded by the partial X, P, and S ORFs present in the 1,828-bp BamHI HBV DNA fragment had no effect. A plasmid encoding only the native HBV core antigen, but not one coding for a truncated core antigen, possessed this inhibitory activity. The inhibition by the core antigen was specific for the regulatory elements of the beta interferon gene; none of a variety of viral transcriptional elements was inhibited.