Aberrant promoter methylation of retinoic acid receptor-beta(2) (RAR-beta(2)) is frequently detected in hepatitis B virus (HBV)-positive hepatocellular carcinoma (HCC); however, the mechanism of methylation and its biological significance are unknown. This study showed that HBx, the principal oncogene product of HBV, induced promoter hypermethylation of RAR-beta(2) via upregulation of DNA methyltransferases 1 and 3a, resulting in downregulation of its expression in human HCC cells. In addition, HBx abolished the potential of retinoic acid (RA) to downregulate levels of G(1)-checkpoint regulators including p16, p21 and p27, resulting in activation of E2F1 in the presence of RA. As a consequence, HBx-expressing cells were less susceptible to RA-induced cell growth inhibition compared with control cells. These effects almost completely disappeared when levels of RAR-beta(2) in HBx-expressing cells were restored by treatment with a universal DNA methylation inhibitor, 5-aza-2'-deoxycytidine. As RAR-beta(2) is a major executor of the anti-tumour potential of RA, its epigenetic downregulation by HBx is likely to be an important step during HBV-mediated tumorigenesis.