TGF-beta 1 has been implicated in the pathogenesis of liver disease. The high frequency of detection of the hepatitis B virus X (HBx) antigen in liver cells from patients with chronic hepatitis, cirrhosis, and liver cancer suggested that expression of HBx and TGF-beta 1 may be associated. To test this possibility, we examined the expression of TGF-beta 1 in the liver of transgenic mice expressing the HBx gene. We show that the patterns of expression of TGF-beta 1 and Hbx protein are similar in these mice and that HBx activates transcription of the TGF-beta 1 gene in transfected hepatoma cells. The cis-acting element within the TGF-beta 1 gene that is responsive to regulation by Hbx is the binding site for the Egr family of transcription factors. We further show that the Egr-1 protein associates with the HBx protein, allowing HBx to participate in the transcriptional regulation of immediate-early genes. Our results suggest that expression of Hbx might induce expression of TGF-beta 1 in the early stages of infection and raise the possibility that TGF-beta 1 may play a role in hepatitis B virus pathogenesis.