Deletion mutations were introduced into the hepatitis B virus (HBV) capsid (core) gene to determine the effect on capsid formation, pregenome encapsidation, reverse transcription, and second-strand DNA synthesis. Carboxy-truncated HBV core proteins were expressed in insect cells using recombinant baculoviruses and were tested for capsid forming ability. Sucrose gradient sedimentation analysis revealed that core proteins missing 39 carboxy terminal amino acids produced capsids while removal of an additional 9 amino acids prevented capsid formation. Truncated core proteins co-expressed in the human hepatoma cell line Huh7 were assayed for their ability to complement in trans an HBV genomic plasmid containing a defective core gene. Mutants lacking 7 and 12 carboxy terminal residues complemented the defective core gene of the HBV plasmid as assayed by synthesis of HBV DNA via reverse transcription of the encapsidated RNA pregenome, although the mutant lacking 12 residues was partially defective in completing second-strand DNA synthesis. Capsids formed using a core deletion mutant missing 20 carboxy terminal residues contained HBV RNA but contained little if any HBV DNA. However, the largest encapsidated RNA species was only 1.7 kb, about half the size of the 3.5-kb RNA found in wild-type HBV capsids. Hybridization analysis revealed that the shorter RNA lacked sequences corresponding to the 3' half of the pregenomic RNA. Implications of these findings on HBV packaging are discussed.