Hepatitis B virus (HBV) X protein (HBx) is considered to play a role in the development of hepatocellular carcinoma (HCC) during HBV infection. HCC was shown to be more prevalent in men than in women. Estrogen, which exerts its biological function through estrogen receptor (ER), can inhibit HBV replication. ERΔ5, an ERα variant lacking exon 5, was found to be preferentially expressed in patients with HCC compared with patients with normal livers. Here, we report the biological role of ERΔ5 and a novel link between HBx and ERα signaling in hepatoma cells. ERΔ5 interacts with ERα in vitro and in vivo and functions as a dominant negative receptor. Both ERα and ERΔ5 associate with HBx. HBx decreases ERα-dependent transcriptional activity, and HBx and ERΔ5 have additive effect on suppression of ERα transactivation. The HBx deletion mutant that lacks the ERα-binding site abolishes the HBx repression of ERα. HBx, ERα and histone deacetylase 1 (HDAC1) form a ternary complex. Trichostatin A, a specific inhibitor of HDAC enzyme, can restore the transcriptional activity of ERα inhibited by HBx. Our data suggest that HBx and ERΔ5 may play a negative role in ERα signaling and that ERα agonists may be developed for HCC therapy.