Although the integration of hepatitis B virus (HBV) into human DNA has been found to be associated with the development of hepatocellular carcinoma (HCC), the molecular mechanism remains unclear. In order to obtain additional insight into the correlation of HBV integration and HCC development, integrated HBV in 14 primary HCC cases was isolated and characterized by sequencing analysis. Our findings in this study showed that: (1) none of the known cellular oncogene or tumor suppressor gene was affected by the HBV integration; (2) although the integration of HBV is random, the integration site was often within or close to human repetitive sequences; (3) integrated HBV may possess the capacity to transpose to another chromosome region through reintegration; (4) rearrangements of HBV sequence were observed in all the 14 integrants, involving (most frequently) X (12/14 integrants), P (8/14), S (7/14), and C (7/14) genes; and (5) 3'-deleted X gene and consequent C-terminal truncated X protein caused by HBV integration was observed in 10 cases. These deletions cause the losses of p53-dependent transcriptional repression binding site, transcription factor Sp1 binding site, and growth-suppressive effect domain, leading to cell proliferation and transformation. This finding suggests that 3'-deleted X gene caused by the HBV integration may play an important role in the HCC development.