Infants born to hepatitis B virus carrier mothers, who express a secreted form of the nucleocapsid antigen designated HBeAg, invariably become persistently infected. To investigate the role of immunologic tolerance mechanisms in chronic infection of the newborn, we have generated HBeAg-expressing transgenic mice. HBeAg-expressing transgenic mice were tolerant to both HBeAg and the nonsecreted nucleocapsid (hepatitis B cor antigen/HBcAg) at the T-cell level. Transgenic mice did not produce antibody to HBeAg but did produce anti-HBc antibody in vivo and in vitro. The coexistence of tolerance to HBc/HBe T-cell determinants and anti-HBc antibody production in vivo parallels the immunologic status of neonates born to carrier mothers. It was also demonstrated that the maintenance of T-cell tolerance to HBcAg/HBeAg required the continued presence of the tolerogen and in its absence persisted for less than 16 weeks. The reversibility of T-cell tolerance to HBcAg/HBeAg may explain the inverse correlation between age of infection and rates of viral persistence. These observations suggest that a function of the HBeAg may be to induce immunologic tolerance in utero. Expression of HBeAg may represent a viral strategy to guarantee persistence after perinatal infection.