Progression through the cell cycle is controlled by the induction of cyclins and activation of cognate cyclin-dependent kinases. The human hepatitis B virus-X (HBV-X) protein functions in gene expression alterations, in the sensitization of cells to apoptotic killing and deregulates cell growth arrest in certain cancer cell types. We have pursued the mechanism of growth arrest in Hep3B cells, a p53-mutant human hepatocellular carcinoma (HCC) cell line. In stable or transient HBV-X transformed Hep3B cells, HBV-X increased protein and mRNA levels of the cyclin-dependent kinase inhibitor (CDKI) p21(waf1/cip1) increased binding of p21(waf1/cip1) with cyclin-dependent kinase 2 (CDK2), markedly inhibited cyclin E and CDK2 associated phosphorylation of histone H1 and induced the activation of a p21 promoter reporter construct. By using p21 promoter deletion constructs, the HBV-X responsive element was mapped to a region between -1185 and -1482, relative to the transcription start site. Promoter mutation analysis indicated that the HBV-X responsive site coincides with the ets factor binding sites. These data indicate that in human hepatocellular carcinoma cells, HBV-X can circumvent the loss of p53 functions and induces critical downstream regulatory events leading to transcriptional activation of p21(waf1/cip1). As a consequence, there is an increased chance of acquisition of mutations which can enhance the genesis of hepatomas. Our results also emphasize the chemotherapeutic potential of p21(waf1/cip1) inhibitors, particularly in the HBV-X infected hepatoma which lacks functional p53.