The mechanism of hepatitis B virus (HBV)-specific T cell hyporesponsiveness in hepatitis Be antigen (HBeAg)-positive subjects is not well understood. Inefficient antigen processing and transport to major histocompatibility complex class I molecules, namely due to low molecular weight protein (LMP) 2 and 7 and transporter associated with antigen processing (TAP) 1 and 2 genes could be playing a role. Forty patients with chronic hepatitis B (CHB) infection, hepatitis B surface antigen, and HBeAg positive; 26 with raised (Gr. I) and 14 with persistently normal ALT levels (Gr. II) and 11 healthy controls (Gr. III) were studied. Total RNA was isolated from peripheral blood mononuclear cells and mRNA expression of TAP1, TAP2, LMP2, and LMP7 genes was analyzed by semi-quantitative reverse transcriptase-polymerase chain reaction method. Gamma interferon (IFN-gamma) and tumor necrosis factor-alpha (TNF-alpha) levels were quantified by enzyme-linked immunosorbent assay (ELISA) using log-log and linear graphs, respectively. Group II CHB patients had significantly lower mRNA expression for TAP1 (p = 0.003) and LMP2 (p = 0.002) genes as compared to Gr. I patients. The mRNA expression of TAP2 and LMP7 genes was comparable between the groups. However, expression of TAP1 (p = 0.02), TAP2 (p = 0.035), and LMP2 (p = 0.041) was found to be significantly higher in Gr. III subjects compared to Gr. I and Gr. II patients. In Gr. I and II, the IFN-gamma {s54.2{9.4-165} pg/ml), (59.5{28.5-110} pg/ml)}, and TNF-alpha {12.0 (8.0-23.2)},{10.8(6.2-20.8)} pg/ml levels were comparable but were significantly (p = 0.00,0.004, respectively) higher than Gr. III subjects. Low expression of TAP1 and LMP2 suggests an important role of these genes in defective viral antigen processing in immune tolerant state of CHB patients. Higher IFN-gamma and TNF-alpha production in CHB are probably enough to potentiate liver injury but not enough to clear the chronic HBV infection. These novel observations could pave way for new therapeutic strategies for immune restoration in CHB infected patients.