Formation of enveloped viruses involves assembly and budding at cellular membranes. In this study, we elucidated the morphogenesis of hepadnaviruses on the ultrastructural and biochemical level using duck hepatitis B virus (DHBV) as a model system. Formation of virus progeny initiates at the endoplasmic reticulum (ER) and is conserved both in vitro and in vivo. The morphogenesis proceeds via membrane-surrounded vesicles containing both virions and subviral particles, indicating a common morphogenetic pathway. The virus particle-containing vesicles (VCVs) are generated and maintained by reorganization of endomembranes accompanied by a striking disorganization of the rough ER (rER). DHBV-infected hepatocytes produce not only complete virions, but also large quantities of subviral particles (SVPs). SVPs are devoid of the nucleocapsid and viral DNA, 4,5 but contain the envelope proteins. The extracellular DHB virion has a spherical structure of approximately 45 to 65 nm and contains an electron-dense nucleocapsid of about 27 nm. 6 Little is known about the morphogenesis of this virus family, but several of the following features indicate that this process is likely to be unique and complex: the DHB viral envelope proteins are multispanning transmembrane proteins, encoded by a single open reading frame, whose differential transcription results in the large (L) and the small (S) surface protein. 7 Both proteins share an identical carboxyterminal region, representing the S protein, with an additional Nterminal extension forming the preS-region of L. The ratio between the L and S proteins in the viral particles is about 1:4. 8 As the major structural component of the envelope, the S protein determines envelope curvature and is indispensable for both budding and secretion of viral particles. 9 Both surface proteins are synthesized at the rough endoplasmic reticulum (ER), or rER, and then bud into the ER lumen, forming SVPs. This budding event is autonomous and independent of all other viral components (e.g., nucleocapsid). 10,11 The intrinsic membrane-deforming activity of hepadnaviral envelope proteins is host cell-independent and conserved from yeast to