There is a lack of knowledge regarding the effect of peginterferon (PEG-IFN) on the expression of intrahepatic hepatitis B core and surface antigen (HBcAg and HBsAg) in chronic hepatitis B (CHB) and its relation with response to therapy. Fifty-two HBeAg-positive and 67 HBeAg-negative CHB patients with paired liver biopsies taken at baseline and after 1year of PEG-IFN therapy were studied. After PEG-IFN therapy, HBeAg-negative patients showed a significant reduction in both intrahepatic HBcAg (P=0.04) and HBsAg expression (P<0.001). In contrast, a reduction in intrahepatic HBcAg expression was not observed in HBeAg-positive patients, while a trend in reduction of intrahepatic HBsAg staining was found (P=0.09). Post-treatment, 7 (13%) HBeAg-positive and 9 (14%) HBeAg-negative patients had no expression of intrahepatic HBsAg. Patients without any intrahepatic HBsAg expression post-treatment were more likely to achieve a combined response (HBeAg loss with hepatitis B virus (HBV) DNA <2000IU/mL for HBeAg -positive and HBV DNA <2000IU/mL and normal alanine aminotransferase for HBeAg-negative CHB): 71% vs 5% for HBeAg-positive (P<0.001) and 60% vs 16% for HBeAg-negative patients (P=0.004), respectively. Moreover, a more profound decline of serum HBsAg was observed in patients with absence of intrahepatic HBsAg staining (3.1 vs 0.4logIU/mL, P<0.001 and 1.7 vs 0.4logIU/mL, P=0.005 for HBeAg-positive and HBeAg-negative CHB, respectively). In conclusion, PEG-IFN reduces expression of intrahepatic HBsAg. Loss of HBsAg as assessed by immunohistochemistry from the liver predicts a sustained response and is reflected in a pronounced serum HBsAg decline.