The hepatitis B virus surface gene is transcribed from two promoters, and the resulting mRNA species code for three distinct forms of the surface antigen. We show here that the viral transcriptional trans-activator, X protein, has no effect on either promoter. However, a cis-acting element in the downstream half of the X gene, distinct from the previously mapped viral enhancer, selectively activates the major surface gene promoter. Nuclease protection and gel-shift assays reveal that multiple cellular factors bind to two sites within this DNA fragment, both of which are necessary for enhancer activity. Since this region of the viral genome is frequently deleted upon integration into the hsot chromosome in chronic hepatitis B, loss of this second enhancer can alter the relative amounts of the three forms of the surface antigen in infected hepatocytes and thus possibly contribute to cellular damage.