Infection with hepatitis B virus can result in asymptomatic seroconversion with viral clearance, fulminant hepatic failure and death, or chronic, typically lifelong, transmissible infection. The mechanism(s) of viral persistence are poorly understood but viral clearance and fulminant hepatic failure are generally thought to result from co-ordinated and effective and abnormally vigorous immune responses, respectively, whereas viral persistence results from immunological failure in addition to poorly characterized viral factors promoting persistence. This paper proposes (1) that the predominant viral factor(s) promoting persistence of hepatitis B virus are homeostatic mechanism(s) responsible for modulating its replication and mutation and (2) that chronic hepatitis B results when these mechanisms are successful and other outcomes occur when these homeostatic mechanism(s) fail. Furthermore, it is proposed that seroconversion (e.g. from HBsAg to anti HBsAg positivity), when it occurs, is a consequence facilitated by restricted viral antigenic diversity and reduced viral replication rather than a proximate cause of it. The specific homeostatic mechanisms proposed--negative feedback inhibition of hepatitis B virus DNA polymerase/reverse transcriptase mediated by HBs antigen and a hepatitis B virus DNA polymerase fidelity modulating function of HBeAg--are consistent with the available data and resolve many paradoxical clinical observations. But, more importantly, this model has clear implications for therapy, including the rational design of drugs and therapeutic vaccines.