Hepatitis B virus currently infects more than 400 million people worldwide. Despite the availability of hepatitis B vaccine, the overall prevalence of hepatitis B virus infection has declined little in recent years. Hepatitis B virus causes liver injury by an immune response against the virus-infected liver cells and is not directly cytopathic, although immunosuppression appears to enhance replication and lead to direct cytotoxicity. The interplay of the host immune response and the virus's ability to replicate is a prime determinant of the likelihood of liver injury, its intensity, and progression to cirrhosis. A series of stages evolve in the life cycle of each patient's infection, with associated decreases in viral load at each successive stage. Viral mutations in the polymerase or the core gene affect replication and may enhance liver injury. Recently, genotypes have been identified that are linked to clinical outcomes, drug responses, and mutations. Four drugs (interferon alpha, lamivudine, adefovir, and entecavir) have been approved by the US Food and Drug Administration for treatment of hepatitis B virus; they effectively decrease replication and reduce inflammation and fibrosis. Treatment of hepatitis B virus in complex situations such as co-infection with human immunodeficiency virus or immunosuppressive therapy remains challenging. The use of hepatitis B vaccine has been shown to reduce the incidence of new infection in many regions. A decline in the prevalence of hepatitis B infection worldwide will require changes in high-risk behavior and the wider use of vaccination.