AB-506 is a potent, pan-genotypic small molecule capsid inhibitor that inhibits hepatitis B virus (HBV) pregenomic RNA encapsidation. We assessed the safety, pharmacokinetics, and antiviral activity of AB-506 in two randomized, double-blinded Phase 1 studies in healthy subjects (HS) and subjects with chronic HBV infection (CHB). Single ascending and multiple doses of AB-506 or placebo (30–1000 mg or 400 mg daily for 10 days) were assessed in HS. AB-506 or placebo was assessed at either 160 mg or 400 mg daily for 28 days in subjects with CHB. A second follow-up study examined AB-506 or placebo at 400 mg daily for 28 days in 14 Caucasian and 14 East-Asian HS. Twenty-eight days of AB-506 at 160 mg and 400 mg produced mean HBV-DNA declines from baseline of 2.1 log₁₀ IU/ml and 2.8 log₁₀ IU/ml, respectively. Four subjects with CHB (all Asian) had Grade 4 alanine aminotransferase (ALT) elevations (2 at each dose) as HBV DNA was declining; three events led to treatment discontinuation. In the second follow-up study, 2 Asian HS had serious transaminitis events leading to treatment and study termination. No subjects had bilirubin elevations or signs of hepatic decompensation. Conclusion: AB-506 demonstrated mean HBV-DNA declines of >2 log₁₀; however, transient but severe ALT flares were observed in 4 Asian subjects with CHB. In the follow-up study in HS, 2 additional Asian HS had Grade 4 flares, suggesting that AB-506 hepatotoxicity contributed to the ALT elevations. The AB-506 development program was terminated because of these findings.