Hepatitis B surface antigen (HBsAg) loss or functional cure (FC), is considered the desirable therapeutic outcome for chronic hepatitis B (CHB) patients. However, the immune-pathological biomarkers and underlying mechanisms remain unclear. Here we present a comprehensive single cell-transcriptomic atlas together with immune-phenotyping of disease-associated cell states (DACS) isolated from intra-hepatic tissue and matched PBMCs of either CHB or FC patients. We find that the intra-hepatic environment displays specific cell identities and molecular signatures that are distinct from PBMCs. FC is associated with emergence of an altered adaptive immune response marked by CD4 cytotoxic T lymphocytes (CD4-CTLs), and an activated innate response represented by liver-resident natural killer (LR-NK) cells. Overall, these findings provide novel insights into immuno-pathological cell states associated with FC that could serve as prognostic biomarkers.