Functional analysis of naturally occurring hepatitis B virus (HBV) mutations is crucial in understanding their impact on disease. We have recently identified two mutations in the HBV core promoter of an HBV strain associated with fulminant hepatitis leading to highly (15-fold) enhanced replication as a result of increased viral encapsidation of pregenomic RNA into the core particles (T. F. Baumert et al., J. Clin. Invest. 98:2268–2276, 1996). Functional studies in an encapsidation assay had demonstrated that the increase in encapsidation was largely independent of pregenomic RNA transcription. In this study, we define the molecular mechanism whereby the two core promoter mutations (C to T at nucleotide [nt] 1768 and T to A at nt 1770) result in enhanced viral encapsidation and replication. The effect of these mutations leading to increased encapsidation is mediated through enhanced core protein synthesis (15-fold) by the mutant virus. The marked increase in core protein synthesis is largely a result of posttranscriptional or translational effect of the mutations because the mutations resulted in only a twofold increase in pregenomic RNA transcription. In addition, this effect appears to be selective for core expression since reverse transcriptase-polymerase expression was increased only twofold. trans-complementation analyses of HBV replication demonstrated that enhanced replication occurred only when the mutations were provided together with the core protein intrans, confirming the functional association of the core promoter mutations and core protein expression. In addition, the effect of the mutations appears to be quantitatively dependent on the strain background to which the mutations were introduced. Our study suggests that the HBV core promoter regulates core protein expression at both transcriptional and posttranscriptional levels.