It is not clear how hepatitis B virus (HBV) modulates host immunity during chronic infection. In addition to the key mediators of inflammatory response in viral infection, monocytes also express a high-level IFN-stimulated gene, CH25H, upon response to IFN-α exerting an antiviral effect. In this study, the mechanism by which HBV manipulates IFN signaling in human monocytes was investigated. We observed that monocytes from chronic hepatitis B patients express lower levels of IFN signaling/stimulated genes and higher levels of inflammatory cytokines compared with healthy donors. HBV induces monocyte production of inflammatory cytokines via TLR2/MyD88/NF-κB signaling and STAT1-Ser727 phosphorylation and inhibits IFN-α–induced stat1, stat2, and ch25h expression through the inhibition of STAT1-Tyr701 phosphorylation and in an IL-10–dependent, partially autocrine manner. Further, we found that enhancement of STAT1 activity with a small molecule (2-NP) rescued HBV-mediated inhibition of IFN signaling and counteracted the induction of inflammatory cytokines. In conclusion, HBV contributes to the monocyte inflammatory response but inhibits their IFN-α/β responsiveness to impair antiviral innate immunity. These effects are mediated via differential phosphorylation of Tyr701 and Ser727 of STAT1.