Human hepatitis B virus (HBV) is one of the causative agents of hepatocellular carcinoma (HCC). The virus encodes a 17 kDa protein, X, which is known to be a causative agent in the formation of HCC. An insulin-like growth factor-II (IGF-II) is expressed during the formation of HCC. Among the four promoters of the IGF-II gene, promoters 2, 3 and 4 become activated during the formation of HCC. The high frequency of detection of hepatitis B virus X (HBV-X) antigen in liver cells from patients with chronic hepatitis, cirrhosis, and liver cancer suggested that the expressions of HBV-X and IGF-II are associated. Studies were carried out to test the relationship between the HBV-X gene product and the activation of IGF-II promoter 4. We demonstrated that the HBV-X protein increases the endogenous IGF-II expression from promoter 3 and 4 of IGF-II gene. Analysis of the fourth promoter of IGF-II gene showed that the HBV-X gene product positively regulates transcription. Two copies of a motif are responsible for conferring HBV-X regulation on the fourth promoter of IGF-II. These motifs have been identified as Sp1 binding sites. Sp1 binding to IGF-II P4 promoter was identified by gel mobility shift assay using purified Sp1. By using a GAL4-Sp1 fusion protein it was demonstrated that HBV-X positively regulates the Spl mediated transcriptional activity of IGF-II in vivo. A protein-affinity chromatography experiment showed that HBV-X protein does not bind directly to Sp1, but HBV-X does augment the DNA binding activity of the phosphorylated form of Sp1 in HepG2 cells. Sp1 was phosphorylated by HBV-X and its DNA-binding activity was up-regulated upon HBV-X transfections. Various HBV-X mutant expression vectors were used for the demonstration of specific interactions between Sp1 and HBV-X. These results indicate that HBV-X functions as a positive regulator of transcription, and that Sp1 is a direct target for the transcriptional regulation of IGF-II. Increasing the DNA binding ability of the phosphorylated form of Sp1 by HBV-X might be an important mechanism for regulating the IGF-II gene expression and possibly promoting cell division during hepatic carcinogenesis. Our experimental results suggest that expression of HBV-X might induce the expression of IGF-II and the IGF-II might play a role in hepatitis B virus pathogenesis during the formation of HCC.