This study followed 314 children who were carriers of hepatitis B virus for 2 to 4 years and compared them with noncarriers, matched for age and sex, from the same community. No confirmed carrier lost hepatitis B surface antigen. Hepatitis B e antigen (HBeAg) was lost at a rate of 10.6% per year; the rate of decay was not affected by age or gender. Liver enzymes were higher in HBeAg-positive than in HBeAg-negative carriers and loss of HBeAg was usually followed by return to values in the normal range. There was evidence, however, of persistent mild liver dysfunction in carriers even after development of antibody to HBeAg. Serum alanine aminotransferase concentrations above twice the upper limit of normal were observed in 7% of carriers on at least one occasion but persisted for more than 1 year in less than 1% and clinical manifestations were rare. The hepatitis B carrier state was uncomplicated during the course of this study. However, risks of subsequent serious disease in adult life may be significant and continued surveillance of carriers is important for individual protection and to determine adverse prognostic features.