Chronic activity of hepatitis B is thought to involve aberrant immune tolerance of unknown mechanism. In this study, we examined the role of CD4(+)CD25(+)Foxp3(+) regulatory T cells in disease activity and viral clearance in hepatitis B. Patients with chronic active hepatitis B (CAH) and asymptomatic HBV carriers (AsC) exhibited a significantly high frequency of CD4(+)CD25(+)Foxp3(+) T cells as opposed to that of controls and resolved HBV infection. These CD4(+)CD25(+) T cells expressed an elevated level of Foxp3 and displayed increased inhibitory activity towards both CD4(+)CD25(-) and CD8(+) effector cells. They were found to accumulate in liver biopsy tissue of CAH patients as opposed to controls. The frequency of CD4(+)CD25(+)Foxp3(+) T cells correlated positively with hepatitis B envelope (HBe) antigen status and serum HBV DNA copy numbers and had a converse relationship with HBe antibody status in patients with CAH and AsC. It was evident that in these patients, the increased frequency of CD4(+)CD25(+)Foxp3(+) T cells was associated with serum levels of transforming growth factor-beta known to promote peripheral conversion of CD4(+)CD25(-) T cells to CD4(+)CD25(+)Foxp3(+) regulatory T cells. The findings provide new insights into the role of CD4(+)CD25(+)Foxp3(+) regulatory T cells in chronic activity and viral clearance in chronic hepatitis B.