Hepatitis B virus (HBV) is a common viral pathogen that causes a substantial health burden worldwide. Significant progress has been made in the past few decades in understanding the natural history of HBV infection. A dynamic balance between viral replication and host immune response is pivotal to the pathogenesis of liver disease. In immunocompetent adults, most HBV infections spontaneously resolve, whereas in most neonates and infants they become chronic. Those with chronic HBV may present in 1 of 4 phases of infection: (1) in a state of immune tolerance, (2) with hepatitis B e antigen (HBeAg)-positive chronic hepatitis, (3) as an inactive hepatitis B surface antigen carrier, or (4) with HBeAg-negative chronic hepatitis. Of these, HBeAg-positive and HBeAg-negative chronic hepatitis may progress to cirrhosis and its long-term sequelae including hepatic decompensation and hepatocellular carcinoma. Several prognostic factors, such as serum HBV DNA concentrations, HBeAg status, serum aminotransferases, and certain HBV genotypes, have been identified to predict long-term outcome. These data emphasize the importance of monitoring all patients with chronic HBV infection to identify candidates for and select optimal timing of antiviral treatment, to recognize those at risk of complications, and to implement surveillance for early detection of hepatocellular carcinoma.