Therapy of chronic hepatitis B virus (HBV) infection with the polymerase inhibitor lamivudine frequently is associated with the emergence of viral resistance. Genotypic changes in the YMDD motif (reverse transcriptase [rt] mutations rtM204V/I) conferred resistance to lamivudine as well as reducing the in vitro replication efficiency of HBV. A second mutation, rtL180M, was previously reported to partially restore replication fitness as well as to augment drug resistance in vitro. Here we report the functional characterization of a third polymerase mutation (rtV173L) associated with resistance to lamivudine and famciclovir. rtV173L was observed at baseline in 9 to 22% of patients who entered clinical trials of adefovir dipivoxil for the treatment of lamivudine-resistant HBV. In these patients, rtV173L was invariably found as a third mutation in conjunction with rtL180M and rtM204V. In vitro analyses indicated that rtV173L did not alter the sensitivity of wild-type or lamivudine-resistant HBV to lamivudine, penciclovir, or adefovir but instead enhanced viral replication efficiency. A molecular model of HBV polymerase indicated that residue rtV173 is located beneath the template strand of HBV nucleic acid near the active site of the reverse transcriptase. Substitution of leucine for valine at this residue may enhance polymerization either by repositioning the template strand of nucleic acid or by affecting other residues involved in the polymerization reaction. Together, these results suggest that rtV173L is a compensatory mutation that is selected in lamivudine-resistant patients due to an enhanced replication phenotype.