The role of hepatocyte nuclear factor 1alpha (HNF1 alpha) in the regulation of hepatitis B virus (HBV) transcription and replication in vivo was investigated using a HNF1 alpha-null HBV transgenic mouse model. HBV transcription was not measurably affected by the absence of the HNF1 alpha transcription factor. However, intracellular viral replication intermediates were increased two- to fourfold in mice lacking functional HNF1 alpha protein. The increase in encapsidated cytoplasmic replication intermediates in HNF1 alpha-null HBV transgenic mice was associated with the appearance of nonencapsidated nuclear covalently closed circular (CCC) viral genomic DNA. Viral CCC DNA was not readily detected in HNF1 alpha-expressing HBV transgenic mice. This indicates the synthesis of nuclear HBV CCC DNA, the proposed viral transcriptional template found in natural infection, is regulated either by subtle alterations in the levels of viral transcripts or by changes in the physiological state of the hepatocyte in this in vivo model of HBV replication.