A preS mutation derived from a patient with chronic hepatitis B virus (HBV) infection who had HBV reinfection with fibrosing cholestatic hepatitis after orthotopic liver transplantation was characterized. Sequence analysis of the HBV genome revealed two deletions and a point mutation in the regulatory CCAAT element of the S promoter. To investigate the particular preS mutation for replication competence and viral assembly in functional experiments, the mutant preS region was introduced into a replication competent HBV plasmid. Functional studies were performed by transfecting this plasmid into hepatoma cells. Analysis of the mutant HBV strain revealed an inverse ratio of S-gene products in comparison to wild-type HBV that leads to intracellular viral retention. An atypical intracellular distribution of HBV proteins and an enhanced nuclear localization of HBV DNA was also detected. Additionally, a major fraction of the extracellular viral particles was malformed. The association of intracellular accumulation of viral proteins with cirrhosis and fibrosing cholestatic hepatitis has been described recently. In this study, we show that the particular preS mutation accounted for the viral retention, which may have contributed to a more progressive form of liver disease found in this HBV-positive patient after liver transplantation.