The role and functional domain of hepatitis B virus (HBV) X protein (HBx) in regulating HBV transcription and replication were investigated with a transient transfection system in the human hepatoma cell line HepG2 using wild-type or HBx-minus HBV genome constructs and a series of deletion or mutation HBx expression plasmids. We show here that HBx has augmentation effects on HBV transcription and replication as a HBV mutant genome with defective X gene led to decreased levels of 3.5-kb HBV RNA and HBV replication intermediates and that these decreases can be restored by either transient ectopic expression of HBx or a stable HBx expression cell line. The C-terminal two-thirds (amino acids [aa] 51 to 154), which contain the transactivation domain, is required for this function of HBx; the N-terminal one-third (aa 1 to 50) is not required. Using the alanine scanning mutagenesis strategy, we demonstrated that the regions between aa 52 to 65 and 88 to 154 are important for the augmentation function of HBx in HBV replication. By the luciferase reporter gene analysis, we found that the transactivation and coactivation activities of HBx coincide well with its augmentation function in HBV transcription and replication. These results suggest that HBx has an important role in stimulating HBV transcription and replication and that the transcriptional transactivation function of HBx may be critical for its augmentation effect on HBV replication.