OBJECTIVE The Hepatitis Foundation has identified many chronic carriers of hepatitis B virus (HBV) in community surveys of schools and family contacts. This study reports the characteristics of carriers and the relationship between hepatitis markers and liver function. METHODS Demographic data from confirmed chronic carriers of HBV in the North Island were correlated with liver function and hepatitis markers. Longitudinal data were obtained by following a cohort for two years with regular blood tests. RESULTS Of 2778 confirmed carriers of HBV most were children or young adults and 56% were male. Sixty percent were Maori and 26% Pacific Island people. Loss of HBsAg occurred at less than 1% per year compared to 9% for HBeAg. Mean ages for 50% loss of HBeAg were 14 years for children of HBV negative mothers and 19 years for those of HBV carrier mothers. Fewer adult males than females were HBeAg positive. Alanine aminotransferase levels above 50 IU/L were found in 16% of HBeAg positive and 6% HBeAg negative cases. Other factors significantly associated with raised alanine aminotransferase were male gender (OR 1.8) and age more than 15 years (OR 2.0). Thirty five percent of HBeAg positive carriers with raised alanine aminotransferase levels spontaneously seroconverted to HBeAg negative in two years. However, raised alanine aminotransferase in HBeAg negative carriers was persistent in most cases and 38% had HBV-DNA detectable in serum. CONCLUSIONS HBV carriage is less benign in adults than children, even after loss of HBeAg. It is recommended that all HBV carriers have regular checks of liver function. Those with persistent abnormality should be strongly advised to restrict alcohol and be assessed for possible antiviral treatment.