Hepatitis B virus (HBV) is a co-factor in some hepatocellular carcinomas (HCC). Chronic infection with HBV is a risk factor for tumor development, suggesting the accumulation of cellular genetic changes. HBV DNA is frequently found integrated at random sites in HCC, with chromosomal deletions and rearrangements being common at the sites of viral integration. Tumor suppressor gene p53 is frequently altered in HCC. Environmental carcinogens are factors in HCC development in certain geographic locations. HBV encodes a protein (X) known to transactivate viral and cellular genes; the X gene is often retained in HCC. To learn more about X gene function. We employed the yeast two-hybrid genetic system to seek X-interactive proteins. A cellular protein, designated XAP-1, was recovered that interacts specifically with the X protein. XAP-1 is the human homologue of the monkey UV-damaged DNA-binding protein (UV-DDB); the UV-DDB protein functions in DNA repair and is defective in some xeroderma pigmentosum group E patients. The interaction between XAP-1 and HBV X protein was confirmed by several independent methods. This suggests that cellular DNA repair processes may be affected by HBV and that the resulting genetic instability may contribute to hepatocellular carcinogenesis. A unifying model of the molecular basis of HBV involvement in HCC development is presented. Fundamental components of the model are chronic infection by HBV and viral effects on cellular DNA repair. This model has implications for the possible role of HCV infection in the induction of HCV-associated HCC.