About 200 million people are chronic carriers of hepatitis B surface antigen (HBsAg), but since hepatitis B virus (HBV) cannot be propagated in vitro, HBsAg transcription has been studied only in cell lines containing HBV DNA integrated into chromosomes, and HBsAg-related mRNAs 2.0 to 2.5 kilobases (kb) long have been described. We have analysed the transcripts produced in an infected chimpanzee liver and in a rat cell line containing HBV DNA. In contrast to previous suppositions we report here that the major S gene transcript initiates close to the S gene, that is, within the 'pre-S' region and is processed/polyadenylated at a site situated within the core gene. The efficiency of processing/polyadenylation at this site varies between the chimpanzee liver and the rat cell line studied. The S gene promoter does not contain a TATA box but instead has a sequence homologous to that which positions the 5' ends of the major simian virus 40 (SV40) late transcript.