The hepatitis B virus (HBV) causes either self-limiting acute or chronic hepatitis in infected individuals. Approximately 350 million people are chronically infected with HBV worldwide, leading to over 1 million deaths per year from cirrhosis and hepatocellular carcinoma. The long-term goal of this application is to define the cellular mechanisms that modulate the replication and persistence of HBV. The clearance of HBV from an infected host likely requires both the non-cytopathic inhibition of HBV replication induced by interferon (IFN), as well as the killing of infected hepatocytes by virus-specific cytotoxic T-lymphocytes (CTL). Previously, it has been demonstrated that IFN inhibits HBV replication by reducing the assembly and/or stability of HBV RNA-containing capsids in a proteasome-dependent manner. The proteasome is a large multisubunit protease that degrades cytoplasmic and nuclear proteins, thereby regulating protein stability and generating peptides for presentation by MHC class I molecules. The interaction between the proteasome and HBV may therefore be an important determinant of viral replication and the progression of infection to either acute or chronic liver disease. Thus, we will examine the hypothesis that regulation of proteasome activity by IFN is critical for both the non-cytopathic inhibition of HBV replication, as well as the host adaptive immune response to the virus. Using RNA interference-based approaches in HBV transgenic mice and immortalized hepatocyte cell lines, we will determine if the IFN-inducible proteasome catalytic (LMP2, LMP7, MECL-1) or regulatory (PA28) subunits mediate the inhibition of HBV replication by IFN. We will also examine the influence of LMP2 and LMP7 on the magnitude, specificity, and avidity of the CTL response to the HBV core, polymerase, and envelope proteins using human HLA-A2 transgenic mice genetically deficient for these subunits. These studies may provide a better understanding of the host factors that modulate HBV replication and that ultimately determine the outcome of infection.