Presentation of class I major histocompatibility complex (MHC) is severely down-regulated on hepatocytes in chronic hepatitis caused by woodchuck hepatitis virus (WHV).To determine which of the viral proteins mediates class I MHC antigen suppression, cultured normal woodchuck hepatocytes were transfected with the complete WHV genome, sequences encoding individual virus proteins, or whole virus genomes in which transcription of selected proteins was disabled by site-specific mutagenesis. It was found that hepatocyte presentation of class I MHC antigen was significantly inhibited following transfection with complete WHV genome or with viral subgenomic fragments encoding envelope pre-S2 protein or pre-S1 protein, which naturally encompasses pre-S2 amino acid sequence. In contrast, hepatocytes transfected with WHV X gene alone demonstrated a profound enhancement in the class I antigen display, whereas those expressing virus major S protein or nucleocapsid (core) protein were not different from control hepatocytes. Analysis of the mutated WHV sequences confirmed that the envelope pre-S2 protein was responsible for inhibition of the class I MHC antigen display. Interestingly, treatment with recombinant woodchuck gamma interferon (rwIFN-␥) restored the inhibited presentation of the class I antigen. Moreover, the class I antigen suppression was not associated with down-regulation of hepatocyte genes for class I MHC heavy chain,  2 -microglobulin, transporters associated with antigen processing, and proteasome subunits. These findings indicate that the defective presentation of class I MHC antigen on hepatocytes transcribing WHV is a consequence of posttranscriptional suppression exerted by virus pre-S2 protein and that this hindrance can be fully reversed by IFN-␥.Hepatitis B virus (HBV) is a member of the hepadnavirus family, which includes, among several mammalian and avian viruses, woodchuck hepatitis virus (WHV), which naturally infects eastern North American woodchucks (Marmota monax). Woodchucks infected with WHV represent a highly valuable natural model of hepatitis B in which molecular, immunological, and histological sequelae of virus-induced liver inflammation closely resemble those encountered in humans, including development of chronic hepatitis (20,32). It is now also evident that HBV and WHV invade and replicate not only in hepatic tissue but also in the lymphatic system, although under most circumstances, less vigorously than in the liver (24-26). The host cellular immune responses directed against hepadnavirus protein epitopes displayed on infected hepatocytes, particularly those mediated by cytotoxic T lymphocytes (CTL), are regarded to be crucial in the recovery from acute hepatitis as well as in the induction of hepatocellular damage in actively progressing infection (3). In contrast to acute hepatitis, which is characterized by a strong and specific CTL response directed towards multiple virus epitopes, chronic hepatitis B is characterized by a weak and narrowly focused CTL antiviral reactivity. It ...