Mouse L cells transformed with recombinant plasmids carrying hepatitis B virus (HBV) DNA fragments were used to study the transcription of the viral surface antigen gene (gene S). An HBV-specific, polyadenylated, 2.3-kilobase RNA was mapped on the HBV genome. This RNA hybridized with approximately 75% of the genome and excluded the region of the HBV core antigen gene (gene C). The 2.3-kilobase RNA species was present only in cell lines that produced hepatitis B surface antigen. An HBV-specific 2.3-kilobase RNA was also detected in human hepatoma cell line PLC/PRF/5 which produced hepatitis B surface antigen. A study of gene S expression in the transformed mouse L cells allowed us to localize the regions of initiation and termination of gene S transcription. Our results strongly suggest that the 2.3-kilobase RNA molecule is the mRNA of the major polypeptide of the envelope, which carries the viral surface antigen determinants.