Presentation of class I major histocompatibility complex (MHC) is severely down-regulated on hepatocytes in chronic hepatitis caused by woodchuck hepatitis virus (WHV). To determine which of the viral proteins mediates class I MHC antigen suppression, cultured normal woodchuck hepatocytes were transfected with the complete WHV genome, sequences encoding individual virus proteins, or whole virus genomes in which transcription of selected proteins was disabled by site-specific mutagenesis. It was found that hepatocyte presentation of class I MHC antigen was significantly inhibited following transfection with complete WHV genome or with viral subgenomic fragments encoding envelope pre-S2 protein or pre-S1 protein, which naturally encompasses pre-S2 amino acid sequence. In contrast, hepatocytes transfected with WHV X gene alone demonstrated a profound enhancement in the class I antigen display, whereas those expressing virus major S protein or nucleocapsid (core) protein were not different from control hepatocytes. Analysis of the mutated WHV sequences confirmed that the envelope pre-S2 protein was responsible for inhibition of the class I MHC antigen display. Interestingly, treatment with recombinant woodchuck gamma interferon (rwIFN-gamma) restored the inhibited presentation of the class I antigen. Moreover, the class I antigen suppression was not associated with down-regulation of hepatocyte genes for class I MHC heavy chain, beta(2)-microglobulin, transporters associated with antigen processing, and proteasome subunits. These findings indicate that the defective presentation of class I MHC antigen on hepatocytes transcribing WHV is a consequence of posttranscriptional suppression exerted by virus pre-S2 protein and that this hindrance can be fully reversed by IFN-gamma.