The deoxyguanosine analog penciclovir (PCV; 9-[4-hydroxy-3-hydroxymethyl-but-1-yl]guanine), has shown potent antiviral activity against herpes viruses and hepadnaviruses. Efficacy against chronic hepatitis B virus (HBV) infection has been demonstrated in an animal model and in recent clinical trials of famciclovir, the oral form of PCV. The antiviral activity of PCV is believed to be dependent on the intracellular formation of PCV-triphosphate (PCV-TP) which is presumed to inhibit HBV replication by interfering with viral DNA polymerase activity. The (S)-enantiomer is preferentially formed in herpes virus-infected cells, and is the more active against the herpes simplex virus; however, little is known about the biochemical mechanisms of PCV phosphorylation or of interference with viral replication in HBV-infected cells. Here, we report that in contrast with herpes simplex virus, the (R)-enantiomer of PCV-TP is a more potent inhibitor of HBV DNA polymerase-reverse transcriptase (pol-RT) in vitro than the (S)-enantiomer. In assays for HBV DNA pol-RT activity, in which purified viral core particles were the enzyme source, the IC50s for (R)- and (S)-enantiomers of PCV-TP were 2.5 micromol/L and 11 micromol/L, respectively. The estimated Kis for (R)- and (S)- PCV-TP were approximately 0.03 micromol/L and approximately .04 micromol/L, respectively, about 3-fold lower than the Km for deoxyguanosine triphosphate (dGTP) in the same system. In addition, we report that PCV metabolism is similar in both control (HepG2) and in HBV-transfected (2.2.15) hepatoblastoma cells in vitro, indicating that cellular enzyme(s) catalyze PCV phosphorylation. Peak PCV-TP concentrations of about .4 micromol/L were reached in both cell types in less than 12 hours, and intracellular PCV-TP was exceptionally stable with a half-life of about 18 hours. These observations provide a mechanistic basis for the potent activity of PCV against HBV.