Hepatitis B virus (HBV) is a contagious human pathogen causing liver diseases such as cirrhosis and hepatocellular carcinoma. An essential step during HBV replication is packaging of a pregenomic (pg) RNA within the capsid of core antigens (HBcAgs) that each contains a flexible C-terminal tail rich in arginine residues. Mutagenesis experiments suggest that pgRNA encapsidation hinges on its strong electrostatic interaction with oppositely charged C-terminal tails of the HBcAgs, and that the net charge of the capsid and C-terminal tails determines the genome size and nucleocapsid stability. Here, we elucidate the biophysical basis for electrostatic regulation of pgRNA packaging in HBV by using a coarse-grained molecular model that explicitly accounts for all nonspecific interactions among key components within the nucleocapsid. We find that for mutants with variant C-terminal length, an optimal genome size minimizes an appropriately defined thermodynamic free energy. The thermodynamic driving force of RNA packaging arises from a combination of electrostatic interactions and molecular excluded-volume effects. The theoretical predictions of the RNA length and nucleocapsid internal structure are in good agreement with available experiments for the wild-type HBV and mutants with truncated HBcAg C-termini.