More than 95% of adult infected with HBV show acute self-limited infection and eventually eliminate the virus. In contrast, about 90% of people exposed to HBV in early childhood develop chronic infection. The specificity of the virus and the host's antiviral immune responses together determine the outcome of HBV infection. It is generally believed that viral genome variation, viral titers, and inhibition of viral components against the host immune system are associated with persistent infection and liver damage. The dysfunction of innate immune cells (NK cells, monocyte/macrophages, NKT cells, etc.) and adaptive immune cells (antigen-presenting cells, T cells, B cells) is a key factor leading to virus clearance failure and liver inflammation. In this chapter, we summarize these viral factors and host factors in acute and chronic hepatitis B and update recent understanding of the immune-tolerant phase and pathological mechanisms associated with age and vertical transmission. This will help us to understand more fully the mechanisms of chronic HBV infection and liver injury and to develop combined treatment strategies of direct antiviral drugs for HBV life cycle and immunomodulators.