Chronic infection with hepatitis B virus (HBV) has potentially devastating consequences and is very difficult to treat. Therapy with recombinant interferons (IFN), especially IFN-alpha, may be effective. The blood IFN-alpha levels that are needed to maintain therapeutic IFN-alpha levels in the liver, however, often cause severe side effects. Gene delivery to the liver may provide a solution. Using a long-term expression construct could provide the desired levels of IFN locally without the need to maintain potentially problematic blood levels. Recombinant, Tag-deleted SV40-derived vectors transduce hepatocytes efficiently and provide permanent transgene expression. We designed an expression construct that was effective against HBV and whose activity was limited to HBV-infected cells. To do this, we exploited the ability of HBV X protein to activate NF-kappaB and, via NF-kappaB, to activate promoter activity of HIV long terminal repeat (LTR) in hepatocytes. Using HIVLTR as a conditional promoter upstream of human and murine IFN-alpha and IFN-gamma cDNAs, rSV40 vectors were used to test the responsiveness of IFN to HBV and the ability of these IFNs to inhibit HBV transcripts and protein production and to activate IFN signaling in neighboring untransduced cells. We found that in hepatocyte cell lines and in primary hepatocytes, HBV activated the promoter activity of the HIVLTR via NF-kappaB. When whole HBV genome was delivered to cells by transfection to simulate HBV infection, IFN expression was activated, IFNs were produced and secreted, and they protected cells from HBV. Levels of IFN proteins that were secreted in this context were comparable to targeted blood levels needed to control chronic hepatitis viral infection. Further, IFNs that were elicited and secreted in this manner were able to activate IFN-induced signaling pathways in neighboring, untransduced cells and so were likely to provide protection even to cells that the rSV40 vector did not transduce. Gene delivery using such rSV40 vectors expressing IFNs conditionally in response to HBV may be an attractive therapeutic option for the treatment of chronic hepatitis B.