To investigate host and viral mechanisms determining hepadnaviral persistence and hepatocarcinogenesis, we developed a mouse model by transplanting woodchuck hepatocytes into the liver of mice that contain the urokinase-type plasminogen activator transgene (uPA) and lack mature B and T lymphocytes due to a recombination activation gene 2 (RAG-2) gene knockout. The woodchuck hepatocytes were transplanted via intrasplenic injection and were found to integrate into the recipient mouse liver cord structure. Normal adult woodchuck hepatocytes proliferated and reconstituted up to 90% of the uPA/RAG-2 mouse liver. uPA/RAG-2 mice containing woodchuck hepatocytes were infectable with woodchuck hepatitis virus (WHV) and showed WHV replication for at least 10 months with titers up to 1 x 10(11) virions per ml in the peripheral blood. WHV-infected hepatocytes from chronic carrier woodchucks also established a persistent infection in uPA/RAG-2 mice after an 8- to 12-week lag period of viremia. Although WHV envelope, core, and X proteins were produced in the uPA/RAG-2 mice, no inflammatory host immune response was observed in the liver of WHV-replicating mice. A first antiviral test demonstrated a greater than four orders of magnitude drop in WHV titer in response to interferon alpha treatment. WHV replication was up-regulated by dexamethasone treatment. Comparison of precancerous lesions in donor woodchucks versus recipient uPA/RAG-2 mice revealed an enrichment of dysplastic precancerous hepatocytes in transplanted mice. Clonal amplification of hepatocytes from a woodchuck with hepatocellular carcinomas was demonstrated by the detection of unique WHV DNA integration patterns in hepatocellular carcinomas that arose in uPA/RAG-2 mice. In the absence of B or T cell-mediated immune responses, WHV establishes a persistent noncytotoxic infection of woodchuck hepatocytes in uPA/RAG-2 chimeric mouse livers. Further studies of the kinetics of hepadnavirus infection and replication in quiescent and proliferating hepatocytes should increase our understanding of hepadnavirus spread and aid in the design of therapies to block or cure persistent infection.