Control of viral replication is a major therapeutic goal to reduce morbidity and mortality from chronic hepatitis B virus (HBV) infection. Recently, methylation has been identified as a novel host defense mechanism, and methylation of viral DNA leads to downregulation of HBV gene expression. To better understand the mechanisms of HBV methylation, cell lines were exposed to HBV using a model system that mimics natural infection and the expression of host DNA methyltransferase genes (DNMTs) was measured. DNMT1, DNMT2, and DNMT3 were all significantly upregulated in response to HBV. DNMT3 was further studied because of its known role in the de novo methylation of DNA. Cotransfection experiments with full-length HBV and DNMT3 led to the downregulation of viral protein and pregenomic RNA production. To investigate whether the upregulation of DNMTs could also have an effect on the methylation of host DNA, cell lines were exposed to HBV in two independent model systems, one that mimics natural infection and a second model with temporary transfection. Host DNA methylation was measured by DNA microarray analysis. Increased methylation of host CpG islands was detected in both experimental systems. Two CpG islands, corresponding to genes SUFU and TIRAP, were selected, and the downregulation of these genes in hepatocellular carcinomas was confirmed. In conclusion, hepatocytes respond to HBV infection by upregulating DNMTs. The DNMTs methylate viral DNA, leading to decreased viral gene expression and decreased viral replication. However, virus-induced overexpression of DNMTs also leads to methylation of host CpG islands.