The regulatory protein HBx is essential for hepatitis B virus (HBV) replication in vivo and for transcription of the episomal HBV genome. We previously reported that in infected cells HBx activates genes targeted by the transcription factor CREB [cyclic adenosine monophosphate (cAMP) response element-binding protein]. cAMP induces phosphorylation and activation of CREB, and CREB inactivation is promoted by protein phosphatase 1 (PP1), which binds to CREB through histone deacetylase 1 (HDAC1). We showed that CREB was recruited to HBV DNA. Phosphorylation induced by cAMP had a longer half-life when CREB was bound to the episomal HBV genome compared to when it was bound to the promoter of a host target gene not regulated by HBx, suggesting that the virus has developed a mechanism to favor its own transcription. This mechanism required HBx, which interacted with and inhibited PP1 to extend the half-life of CREB phosphorylation. Silencing of PP1 rescued replication of an HBx-deficient HBV genome, suggesting that HBx enhances viral transcription in part by neutralizing PP1 activity. Our results illustrate a previously unknown mechanism of HBV transcriptional activation by HBx in which HBx interferes with the inactivation of CREB by the PP1 and HDAC1 complex.