Hepadnaviruses replicate by reverse transcription of an RNA intermediate within subviral core particles in the cytoplasm of infected hepatocytes. Recognition of the epsilon encapsidation signal located on the 5' end of the pregenomic RNA by the viral polymerase occurs early in core particle assembly. The epsilon sequences contain a set of nested inverted repeats which form a stable stem-loop structure shown to play a role in RNA packaging and recently implicated as the site of initiation of minus-strand DNA synthesis. We have introduced a variety of site-directed mutations into the epsilon sequences of human hepatitis B virus to study their effects on viral replication in transfected HuH7 cells. We have identified two classes of mutations: those which adversely affect packaging and those which package RNA but adversely affect DNA synthesis. Analysis of these mutants has allowed us to identify separate features of the epsilon cis-acting signal which function in the processes of RNA packaging and reverse transcription.