Primary hepatocellular carcinoma cells (PLC/342) propagated in nude mice produce hepatitis B surface antigen of subtype adr, as well as core particles containing viral DNA and DNA polymerase. Free and integrated forms of hepatitis B virus (HBV) DNA in the tumor were isolated by molecular cloning, and their nucleotide sequences were determined. Both of the two representative clones of free HBV DNA had the same genomic length (3,158 base pairs) and had two stop codons as well as two deletions in the envelope gene. None of the seven distinct clones of integrated HBV DNA possessed the entire viral genome. The integrated clone sequences had deletions and rearrangements, and only two clones possessed the envelope gene including the promoter and enhancer sequences. The C gene, which codes for core protein, was preserved in the two free clones and one of the integrated clones. The P gene, which codes for DNA polymerase, had deletions at two positions of 21 and 36 base pairs in both free clones, but was carried in toto by one of the integrated clones. The nucleotide sequences of the S genes of two free and four integrated clones, as well as their two inverted repeats, were compared. All of the eight sequences of the S gene possessed two nucleotide substitutions in common that were not displayed by any of the reported HBV genomes. The sequences differed from one another by only 1.2%. They differed, however, from 11 reported HBV genomes of subtype adr by 2.4%, from an ayr genome by 1.9%, from 2 adw genomes by 6.9%, and from 2 ayw genomes by 5.9%. These results indicate that all free and integrated HBV DNA species in the PLC/342 tumor cell evolved from a common progenitor. The free HBV DNA underwent nucleotide substitutions during several integration events, resulting in integrated HBV DNA copies that were similar in sequence but distinct from the reported HBV genomes.