The purpose of this study was to determine the age wise prevalence of Hepatitis B virus (HBV) in children under five years and to analyze the relative importance of horizontal or vertical transmission. This study included 400 children in the age group of less than five years attending the outpatient department of pediatrics with minor complaints. History of HBV immunization was taken as the exclusion criteria. All the samples were tested for Hepatitis B surface antigen (HBsAg) and anti HBs using commercial ELISA kits. Liver function tests were performed on all the HBsAg positive patients. Hepatits B nucleocapsid antigen (HBeAg) was detected in few HBsAg positive mothers. Overall HBsAg positivity in children below five years was 2.25%. There was no statistically significant difference in HBsAg positivity in the different age groups by chi square test. HBsAg positivity in mothers was 4.25%. However only in three cases the pair of mother and child were both positive for HBsAg. The mean anti HBs positivity in children was 23.75%. There was no statistically significant difference in the anti HBs positivity in different age groups of children. The observation that there is no statistically significant difference in the prevalence of HBV infection (HBsAg and HBs) amongst different age groups of children below five years signifies that a large proportion of HBV infection in children of this age is acquired via vertical transmission. It is also indicated that this mode of disease transmission is responsible for the majority of chronic carriers. Universal immunization of all infants is desirable to decrease the carrier pool and it is inferred from the present study that Hepatitis B immunization should begin at birth to have greater impact.