HBeAg negative type of chronic hepatitis B is less susceptible to therapy than HBeAg positive ‘wild-type’ infection and is associated with a poor prognosis. Knowledge about the rate of BCP and PC mutations is imperative in terms of treatment response to interferon, development of fulminant hepatitis and hepato cellular carcinoma. This study was conducted to determine the frequency of possible precore mutants, its molecular characterization and correlation with biochemical and serological markers. A total of 495 patients were included from three cities of Pakistan. Patients, positive for HBsAg for more than six months, aged 15 years and above were included in the study. Patients having indication of previous treatment with antiviral or nucleoside analogs were excluded. Viral load, HBeAg/antiHBe status and ALT levels were determined. Direct sequencing of PC and CP region of HBV genome was carried out following a nested PCR. Mutations were analyzed by comparing the sequencing results with known reference sequences. 414 (83.6%) of the patients were HBeAg negative based on ELISA. Among these HBeAg negative patients, 155(31.3%) had detectable DNA levels with possible precore mutations. HBV DNA was detected in all (81) HBeAg positive patients. Mean ALT level and viral load of HBeAg negative patients were significantly (P-value 0.05) lower than HBeAg positive patients. Mean age of HBeAg negative patients was higher than HBeAg positive patients (P. value<0.05). Among 50 isolates, precore stop codon G1896A mutation was detected in 19 (38%) isolates, 17 (34%) in HBeAg negative samples and 02(4%) in HBeAg positive isolates. About half of the samples had mutation at position 1764. Classic 1762/1764 double mutation was noted in 15 (30%) of the isolates. Overall, 9(18%) of the study isolates had wild-type sequences at all important loci. Sequences at genotype specific loci and phylogenetic analysis speculate the preponderance of genotype D in Pakistani isolates. BCP region was more variable as compared to PC region which increases the risk of hepatocellular carcinoma in such patients.