BACKGROUND Recurrent hepatitis B after liver transplantation may be complicated by fibrosing cholestatic hepatitis. This syndrome is associated with rapid graft failure and is characterized by ballooning degeneration of hepatocytes and abundant viral antigen expression. METHODS To study this disorder further, in situ hybridization studies were performed on 36 liver biopsy specimens from 14 transplanted patients with recurrent hepatitis B and 18 nontransplanted controls with chronic hepatitis B. Biopsy specimens were scored for histological features and intensity of riboprobe hybridization signal to hepatitis B virus (HBV) DNA and RNA. RESULTS HBV DNA hybridization signals of 2+ to 3+ intensity were observed in 53% of the posttransplant biopsies but none of the nontransplanted samples (P < 0.001). HBV RNA signals of this intensity were found in 42% of the transplant biopsy specimens compared with 17% of the nontransplant specimens (P < 0.07). Features of fibrosing cholestatic hepatitis were noted in 12 biopsies; 11 of these displayed RNA signals of 2+ to 3+ intensity (92%) compared with 4 of 24 (17%) biopsy specimens without this diagnosis (P < 0.001). The level of hepatocyte RNA correlated with the extent of hepatocellular ballooning (P < 0.007). CONCLUSIONS These data suggest that fibrosing cholestatic hepatitis is associated with enhanced hepatitis B virus transcription and support a cytopathic role for the virus in the development of this syndrome.