A cross-sectional analysis of the prevalence of hepatitis B surface antigenaemia in cord blood from 50 newborn babies and in blood from 415 children admitted to the children's ward of Port Moresby General Hospital indicates that perinatal vertical transmission is likely to be important and that there is a high rate of horizontal transmission in the 1st few years of life. Thirteen per cent of infants aged 3-5 months and 29-30% of those over 2 years of age were strongly positive for hepatitis B surface antigen. Open sores and poor hygiene are likely to play a significant role in the high level of horizontal transmission of hepatitis B virus (HBV) in our context. Our findings give support and urgency to the current active immunization policy against HBV, beginning as soon as possible after birth.