Fifty-one asymptomatic Chinese hepatitis B surface antigen (HBsAg) carrier children (34 boys, 17 girls), age 1 to 15 years (median: 10 years), were prospectively followed for up to 4 years (median: 30 months) to determine the natural evolution of clinical, biochemical and virological features during the early phase of chronic hepatitis B virus infection. Hepatomegaly was the only abnormal finding on examination, being present in five children initially and four at follow-up. Serum ALT levels were normal in 80% of the children at presentation and remained within the normal range during the study in 60%. Fluctuations in ALT levels were mild. In four of 12 instances, transient elevations in ALT levels were associated with a fall in serum hepatitis B virus DNA levels. At presentation, 43 (84%) children were hepatitis B e antigen (HBeAg) positive; only two (7%) cleared HBeAg on follow-up. None of the eight children who were initially positive for the antibody to HBeAg reverted back to HBeAg positivity. All the children remained HBsAg positive. In this study, we demonstrated that chronic hepatitis B virus infection in asymptomatic Chinese children is usually associated with a mild and stable liver disease despite high levels of hepatitis B virus replication. This may reflect an immunological tolerance to the hepatitis B virus induced by early exposure to the virus and accounts for the persistently high levels of hepatitis B virus replication on follow-up.