Hepatitis B virus (HBV)-encoded X antigen (HBxAg) contributes to the development of hepatocellular carcinoma (HCC). A frequent characteristic of HCC is reduced or absent expression of the cell adhesion protein, E-cadherin, although it is not known whether HBxAg plays a role. To address this, the levels of E-cadherin were determined in HBxAg-positive and-negative HepG2 cells in culture, and in tumor and surrounding nontumor liver from a panel of HBV carriers. The results showed an inverse relationship between HBxAg and E-cadherin expression both in tissue culture and in vivo. In HBxAg-positive cells, E-cadherin was suppressed at both the mRNA and protein levels. This was associated with hypermethylation of the E-cadherin promoter. Depressed E-cadherin correlated with HBxAg trans-activation function, as did the migration of HepG2 cells in vitro. Decreased expression of E-cadherin was also associated with the accumulation of β-catenin in the cytoplasm and/or nuclei in tissues and cell lines, which is characteristic of activated β-catenin. Additional work showed that HBxAg-activated β-catenin. Together, these results suggest that the HBxAg is associated with decreased expression of E-cadherin, accumulation of β-catenin in the cytoplasm and nucleus, and increased cell migration, which may contribute importantly to hepatocarcinogenesis.