The mechanisms that regulate hepatitis B virus (HBV) replication within the liver are poorly understood. Given that methylation of CpG islands regulates gene expression in human tissues, we sought to identify CpG islands in HBV-DNA and to determine if they are methylated in human tissues. In silico analysis demonstrated three CpG islands in HBV genotype A sequences, two of which were of particular interest because of their proximity to the HBV surface gene start codon (island 1) and to the enhancer 1/X gene promoter region (island 2). Human sera with intact virions that were largely unmethylated were used to transfect HepG2 cells and HBV-DNA became partially methylated at both islands 1 and 2 by day 6 following exposure of HepG2 to virus. Examination of three additional human sera and 10 liver tissues showed no methylation in sera but tissues showed methylation of island 1 in six of 10 cases and of island 2 in five of 10 cases. The cell line Hep3B, with integrated HBV, showed complete methylation of island 1 but no methylation of island 2. In conclusion, HBV-DNA can be methylated in human tissues and methylation may play an important role in regulation of HBV gene expression.