We used human hepatoma Hep3B/C16 cells as a model to examine the effect of all-trans retinoic acid on the gene expression of hepatitis B surface antigen (HBsAg). Hep3B/C16 is a clonal derivative of human hepatoma Hep3B cell which was stably transfected with HBsAg DNA sequences and can produce hepatitis B virus surface antigen. We analyzed the HBsAg product and mRNA in Hep3B/C16 cells which were exposed to retinoic acid for different periods of time. The level of HBsAg started to increase after 24 h and reached maximum at 48 h of retinoic acid treatment. However, the level of HBsAg expression was severely suppressed compared to the control cells after long term (120 h) retinoic acid treatment. Such biphasic regulation of HBsAg production by retinoic acid was paralleled by the changes of HBsAg mRNA. Nuclear run-on assays also demonstrated that the retinoic acid-mediated regulation was determined at least in part at the transcriptional level. Furthermore, an exposure of the cells to retinoic acid for only 8 h was sufficient to show that up- and down-regulation of HBsAg gene occurred 2 and 5 days later. Using a transient expression system, we demonstrated that the retinoic acid response element is located within the 5'-flanking region of the HBsAg gene.