Chronic hepatitis B infection is a major cause of morbidity and mortality worldwide. Despite effective vaccine and treatments, often unavailable in highly prevalent areas in Asia and Africa, the disease and economic burdens of the condition remain very high. There is as yet no cure for those who have already developed chronic infection, in part due to poor understanding of its pathogenesis. Here, we review the literature on the discovery, production, and regulation of hepatitis B virus pregenomic RNA splicing mechanism, and their effects on viral replication and viral protein expression of the wild-type. The splice variants are found in high numbers in many chronically infected patients, implicating a role in viral persistence. Recently a novel protein produced by a singly spliced viral genome which was detected in vivo, containing well-defined epitopes, was shown to induce specific T-cell responses in peripheral blood mononuclear cells from infected patients. We also highlight some of the major unresolved issues and controversies between the data from experimental and clinical studies.