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Hepatitis B virus (HBV) circulates in blood as closely related, but genetically diverse molecules called quasispecies. During replication, HBV production may approach 1011 molecules/day, although during peak activity this rate may increase 100–1000 times. Generally, DNA polymerases have excellent fidelity in reading DNA templates because they are associated with an exonuclease which removes incorrectly added nucleotides. However, the HBV-DNA polymerase lacks fidelity and proofreading function partly because exonuclease activity is either absent or deficient. Thus, the HBV genome and especially the envelope gene, is mutated with unusually high frequency. These mutations can affect more than one open reading frame because of overlapping genes. The S gene contains an exposed major hydrophilic region (residues 110–155), which encompasses the ‘a’ determinant that is important for inducing immunity. Nucleotide substitutions in this region are common and result in reduced binding or failure to detect hepatitis B surface antigen (HBsAg) in diagnostic assays. Adaptive immunity also depends on the recognition of HBsAg by specific antibody and variants pose a threat if they interfere with binding to antibody. Finally, genomic hypervariability allows HBV to escape selection pressures imposed by antiviral therapies, vaccines and the host immune system, and is responsible for creating genotypes, subgenotypes and subtypes.