Chromosomal translocation, deletion, and inversion/duplication directly linked to hepatitis B virus (HBV) DNA integration occur frequently in host DNA of human hepatocellular carcinomas. To test the possible recombinogenic effect of HBV DNA, we have utilized an in vitro recombination assay. Fragments containing the region spanning DR1, which is believed to be the origin of viral replication and a preferred site in the viral genome for integration, increased the recombination events reproducibly in the presence of extracts from actively dividing cells (e.g., hepatocellular carcinoma) but not resting cells (e.g., normal liver). Moreover, in these extracts we have found a protein(s) that specifically binds to these HBV DNA fragments. These results support the notion that in some instances integrated HBV DNAs cause further genomic instability, possibly involving specific cellular protein(s). The fact that extracts from nondividing, normal liver did not increase recombination events suggests that genomic instability depends upon active cellular growth, a feature more commonly found subsequent to HBV-induced hepatocellular injury than in healthy liver. Our results offer an explanation for the high incidence of liver cancer that accompanies chronic hepatitis and add HBV to the list of agents that can cause genetic recombination.