Cytokines are involved in early host defense against pathogen infections. In particular, tumor necrosis factor (TNF) and interferon-gamma (IFN-gamma) have critical functions in non-cytopathic elimination of hepatitis B virus (HBV) in hepatocytes. However, the molecular mechanisms and mediator molecules are largely unknown. Here we show that interleukin-32 (IL-32) is induced by TNF and IFN-gamma in hepatocytes, and inhibits the replication of HBV by acting intracellularly to suppress HBV transcription and replication. The gamma isoform of IL-32 (IL-32gamma) inhibits viral enhancer activities by downregulating liver-enriched transcription factors. Our data are validated in both an in vivo HBV mouse model and primary human hepatocytes. This study thus suggests that IL-32gamma functions as intracellular effector in hepatocytes for suppressing HBV replication to implicate a possible mechanism of non-cytopathic viral clearance.