The protein encoded by the hepatitis B viral X-gene, HBx, is essential for viral infection and has been shown to regulate gene transcription and the Ras signaling pathway including Raf, MEK, and ERK. To better understand regulatory mechanism of HBx functions, we investigated whether ERK1/2-induced phosphorylation of HBx regulates its transcriptional activity on p21(WAF1/Cip1) promoter. HBx-genotype A (WT1) and its modified HBx (WT2; (SSPSPS43)-S-38 in WT1 was substituted by (PPSSPS43)-P-38 in HBx-genotype F) were phosphorylated by ERK1/2 in vitro, although their Ser --> Ala constructs, SA1 (S-43 of WT1 to A) and SA2 (S-41 of WT2 to A), were not. HBx WT1 and WT2, but not SA2, repressed transcription from the p21(WAF1/Cip1) promoter. This repression was blocked by treatment with PD98059, an inhibitor of MEK, or by overexpression of dominant negative MEK1. Furthermore, WT1 and WT2 localized predominantly in the nucleus, whereas SA1 and SA2 localized to the cytoplasm, suggesting that the subcellular localization of HBx is controlled by its phosphorylation. Overall, our findings provide insight that ERK1/2-mediated phosphorylation of HBx regulates HBx function and localization, and may contribute to dysregulation of cell cycle progression leading to hepatocarcinogenesis in HBV-infected cells. (C) 2004 Elsevier Inc. All rights reserved.