Hepatitis B virus (HBV) replication requires reverse transcription of an RNA pregenome (pgRNA) by a multifunctional polymerase (HP). HP initiates viral DNA synthesis by using itself as a protein primer and an RNA signal on pgRNA, termed epsilon (Hε), as the obligatory template. We discovered a Mn(2+)-dependent transferase activity of HP in vitro that was independent of Hε but also used HP as a protein primer. This protein-primed transferase activity was completely dependent on the HP polymerase active site. The DNA products of the transferase reaction were linked to HP via a phosphotyrosyl bond, and replacement of the Y63 residue of HP, the priming site for templated DNA synthesis, almost completely eliminated DNA synthesis by the transferase activity, suggesting that Y63 also serves as the predominant priming site for the transferase reaction. For this transferase activity, HP could use all four deoxynucleotide substrates, but TTP was clearly favored for extensive polymerization. The transferase activity was highly distributive, leading to the synthesis of DNA homo- and hetero-oligomeric and -polymeric ladders ranging from 1 nucleotide (nt) to >100 nt in length, with single-nt increments. As with Hε-templated DNA synthesis, the protein-primed transferase reaction was characterized by an initial stage that was resistant to the pyrophosphate analog phosphonoformic acid (PFA) followed by PFA-sensitive DNA synthesis, suggestive of an HP conformational change upon the synthesis of a nascent DNA oligomer. These findings have important implications for HBV replication, pathogenesis, and therapy.