Hepatitis B virus (HBV) causes a generally non-cytopathic infection in the liver. Even though HBV is a DNA virus, it replicates via reverse transcription which is coordinated within the viral nucleocapsid by the virus-specific polymerase. The major transcriptional template is the viral mimichromosome from which the viral DNA exists as a covalently closed circular (ccc) molcule. The virus infects hepatocytes but can also be found in non-hepatocyte reservoirs such as bile-duct epithelium, mesangial cells of the kidney, pancreatic islet cells and lymphoid cells. When patients infected with HBV are treated with either interferon alpha or lamivudine, responses are variable and unpredictable. Sophisticated mathematical models analysing the dynamics of viral clearance during antiviral therapy have recently been applied to chronic hepatitis B. Typically complex profiles, rather than the usual biphasic responses seen with other diseases have been observed, indicating that antiviral efficacy requires substantila improvement. This may be achieved with combination chemotherapy. However, chronic hepatitis B is a complex and heterogeneous disease entity, and the challenge for the future is to define measurable end-points of treatment and address key virological issues such as the role of cccDNA and extra-hepatocyte replication in treatment failure. Clearly, new therapies and effective combination therapy protocols are urgently required in order to improve the present poor response rates in patients undergoing treatment.