AIM: To study the therapeutic effects of zhaoyangwan (ZYW) on chronic hepatitis B and hepatic cirrhosis and the anti-virus, anti-fibrosis and immunoregulatory mechanisms of ZYW. METHODS: Fifty cases of chronic hepatitis B and posthepatic cirrhosis with positive serum HBsAg, HBeAg, anti-Hbc and HBV-DNA were divided randomly and single-blindly into the treatment group (treated with ZYW) and the control group (treated with interferon). After 3 month treatment, the effects of the treatment group and the control group were evaluated. RESULTS: The serum ALT normalization was 83.3% (30/36) in the treatment group and 85.7% (12/14) in the control group, with no significant difference (chi2=0.043, P>0.05). After the course, the negative expression rates of the serum HBV-DNA and HBeAg were 44.4% (16/36) and 50% (18/36) in the treatment group, and 50% (7/14) and 50% (7/14) in the control group, respectively, with no significant difference (chi2=0.125, chi2=0.00, both P>0.05). Negative HBsAg and positive HBsAb appeared in 4 cases of the treatment group and 1 case of the control group. Serum anti-HBc turned negative in 6 cases of the treatment group and 1 case of the control group, respectively. After the ZYW treatment, serum CD3+, CD4+, CD8+, CD4+/CD8+ and NK cell activation were significantly increased. Only serum CD3+ and NK cell activation were significantly increased in the control group with a significant difference between the two groups. The serum C4, C1q, C3, B and C9 were significantly increased in the treatment group. In the control group only the serum C4 was increased. The concentration of serum interferon had no change after treatment with ZYW, while it was significantly increased in the control group after treatment with interferon. The ultrastructure of the liver restored, which helped effectively to reduce the degeneration and necrosis of hepatic cells,infiltration of inflammatory cells and hepatic cirrhosis. CONCLUSION: ZYW is a pure Chinese herbal medicine. It can exert potent therapeutic effects on chronic hepatitis B and posthepatic cirrhosis. ZYW has similar therapeutic effects to those of interferon. It is cheap and easily administered with no obvious side-effects. It can be widely used in clinical practice.