Hepatitis B virus is a hepatotropic virus. Its replication and gene expression are mainly restricted to hepatocytes in the infective process. The viral gene expression thus provides a unique system with which to study the control of tissue-specific gene expression. We have previously reported the identification and characterization of the second enhancer (enhancer II) of hepatitis B virus. In this report, we further demonstrate that the minimal functional constituents of the second enhancer, box alpha and box beta, display liver cell and differentiation state specificity. Moreover, box alpha exhibits the same liver cell and differentiation state specificity when functioning as an upstream regulator for the basal core promoter. Gel shift experiments reveal a unique box alpha-binding protein, protein a, which is present only in differentiated liver cells, where enhancer II is functional. The converse is true for another box alpha-binding protein, protein f, which is present only in poorly differentiated liver cells and nonliver cells. The simplest hypothesis that explains these results is that protein a activates and/or protein f suppresses the enhancer and upstream regulator functions. Although C/EBP is a candidate for a transcription factor that interacts with box alpha or box beta, none of the binding factors identified in the gel shift assays, including protein a and protein f, is likely to be C/EBP because they differ from C/EBP in heat lability and sequence preference.