Interferons have been evaluated extensively as candidate antiviral agents in hepadnaviral infection. We examined the effect of recombinant human interferon-gamma on duck hepatitis B virus replication in human hepatoma cells (Huh 7) transiently transfected with cloned duck hepatitis B virus DNA. Cells transfected in the presence of interferon-gamma display a dose-dependent reduction in the levels of encapsidated replicative intermediates in the cytoplasm, as judged by Southern blotting of purified viral core DNA. The effect is observed at interferon-gamma concentrations that do not affect growth rate or viability of Huh 7 cells or their transfection efficiency. Northern analysis of duck hepatitis B virus transcripts in transfected cells demonstrated markedly diminished levels of pre- and subgenomic RNA in interferon-gamma-treated cells. Nuclear run-on analysis was performed to determine whether these transcripts were diminished due to decreased rates of transcription initiation or increased rates of RNA degradation. Levels of transcription initiation were unaffected by interferon-gamma, implying that duck hepatitis B virus transcripts in interferon-gamma-treated cells are degraded more rapidly than in untreated cells.