The natural history of chronic hepatitis B virus (HBV) infection and disease is complex and highly variable. We review the natural history of chronic hepatitis B with emphasis on the rates of disease progression and factors influencing the course of the liver disease. Chronic hepatitis B is characterized by an early replicative phase (HBeAg positive chronic hepatitis) and a late low or non-replication phase with HBeAg seroconversion and liver disease remission (inactive carrier state). Most patients become inactive carriers after spontaneous HBeAg seroconversion with good prognosis, but progression to HBeAg negative chronic hepatitis due to HBV variants not expressing HBeAg occurs at a rate of 1-3 per 100 person years following HBeAg seroconversion. The incidence of cirrhosis appears to be about 2-fold higher in HBeAg negative compared to HBeAg positive chronic hepatitis. In the cirrhotic patient the 5-year cumulative risk of developing hepatocellular carcinoma is 17% in East Asia and 10% in the Western Europe and the United States and the 5-year liver related death rate is 15% in Europe and 14% in East Asia. There is a growing understanding of viral, host and environmental factors influencing disease progression, which ultimately could improve the management of chronic hepatitis B.