The functions of delta antigens (HDAgs) in the replication of hepatitis delta virus (HDV) have been identified previously. The small HDAg acts as a transactivator, whereas the large HDAg has a negative effect on replication. To understand the molecular mechanisms involved in the control of HDV replication, we have established a replication system in Huh-7 cells by cotransfecting a monomeric cDNA genome of HDV and a plasmid encoding the small HDAg. We demonstrate that a leucine repeat in the middle domain of the small HDAg is involved in binding to the HDV genome and transactivation of HDV replication. When the leucine repeat was disrupted by a substitution of valine for leucine at position 115, both RNA-binding and transactivation activity of the small HDAg were abolished. In contrast, the binding and transactivation activities were not affected when Leu-37 and Leu-44 of the small HDAg were replaced by valines. In addition, small and large HDAgs can interact with each other to form protein complexes in vitro. The complex formation that may lead to the trans-dominant negative regulation of large HDAg in HDV replication is mediated by a cryptic signal located between amino acid residues 35 and 65 other than the putative N-terminal leucine zipper motif. Furthermore, an extra 21-amino-acid extension near the N terminus converts the small HDAg into a pseudo-large HDAg with negative regulation activity of HDV replication even though the extreme C-terminal residue is unchanged.