The hepatitis B virus (HBV) and other members of the hepadnaviridae replicate by reverse transcription of an RNA intermediate, pregenomic RNA (pgRNA). pgRNA is also translated into core protein and polymerase (reverse transcriptase) protein. Before being reverse transcribed, pgRNA is sequestrated from the cytoplasm by being packaged, together with polymerase, into subviral particles composed of core protein. For pgRNA to be encapsidated, its 5' end is folded into a stem-loop structure, known as the encapsidation signal or epsilon (epsilon). This stable bipartite stem-loop structure contains a bulge and an apical loop. Besides encapsidation, epsilon is involved in the activation of polymerase, in template restriction and in the initiation of DNA synthesis by reverse transcription. HBV DNA encoding epsilon forms part of the template that is translated into the precore/core fusion protein that is in turn post-translationally modified to produce hepatitis B e antigen (HBeAg). The DNA encoding epsilon may be recombinogenic. Mutations within epsilon can affect its function and sequence conservation within epsilon in natural isolates is therefore high. epsilon could provide a practical target for antiviral therapy.