The hepatitis B virus (HBV) core promoter regulates the transcription of two related RNA products named precore RNA and core RNA. Previous studies indicate that a double-nucleotide mutation that occurs frequently during chronic HBV infection converts a nuclear receptor binding site in the core promoter to the binding site of the transcription factor hepatocyte nuclear factor-1 (HNF-1) and specifically suppresses the transcription of the precore RNA. This mutation also changes two codons in the overlapping X protein coding sequence. In this report, we demonstrate that the X protein and its mutant X(mt) can physically bind to HNF-1 both in vitro and in vivo. Further analyses indicate that both X and X(mt) can enhance the gene transactivation and the DNA binding activities of HNF-1. This finding demonstrates for the first time that the X protein can stimulate the DNA binding activity of a homeodomain transcription factor. Interestingly, while both X and X(mt) can stimulate the HNF-1 activities, they differ in their effects: a smaller amount of X(mt) is needed to generate greater transactivation and DNA binding activities of HNF-1. This functional difference between X and X(mt) may have important implications in HBV pathogenesis and is apparently why they have different effects on the core promoter bearing the HNF-1 binding site.