Little is known about the functional significance of hepatitis B virus (HBV) sequence heterogeneity. Here we analyzed the type, frequency, and function of mutations in the core promoter/enhancer II region of HBV in immunosuppressed patients. The major HBV population in immunosuppressed patients with severe liver disease had deletions, insertions, and/or base changes in this region. Such mutations were not found in immunosuppressed patients with mild disease. Except for two mutations, all created a hepatocyte nuclear factor 1 (HNF1) binding site or a potential HNF3 binding site. Occasionally, known binding sites for C/EBP and HNF4 were additionally duplicated. Eleven mutated core promoter prototype sequences were functionally tested in the context of a wild-type genome by transfection in Huh7 cells. Despite the diversity of mutations tested, all decreased steady-state levels of pre-C mRNA drastically and increased those of the C mRNA/ pregenomic RNA. This correlated with reduced levels of secreted hepatitis B e antigen and increased intracellular levels of core and Pol proteins and replicative HBV DNA intermediates. The levels of secreted HBV DNA-containing particles were also increased although most of the mutations reduced the levels of pre-S/S mRNA and pre-S1, and pre-S2 proteins as well as secretion of hepatitis B surface antigen. These data reveal a novel class of HBV variants with HNF1 binding sites in the core promoter which are characterized by a defect in hepatitis B e antigen expression, enhanced replication, and altered protein levels, all probably mediated by altered transcription factor binding. The phenotype of these variants and their prevalence only in immunosuppressed patients with severe liver disease may indicate that they play a role in pathogenesis.