Alpha interferon (IFN-α) is an approved medication for chronic hepatitis B. Gamma interferon (IFN-γ) is a key mediator of host antiviral immunity against hepatitis B virus (HBV) infection in vivo. However, the molecular mechanism by which these antiviral cytokines suppress HBV replication remains elusive. Using an immortalized murine hepatocyte (AML12)-derived cell line supporting tetracycline-inducible HBV replication, we show in this report that both IFN-α and IFN-γ efficiently reduce the amount of intracellular HBV nucleocapsids. Furthermore, we provide evidence suggesting that the IFN-induced cellular antiviral response is able to distinguish and selectively accelerate the decay of HBV replication-competent nucleocapsids but not empty capsids in a proteasome-dependent manner. Our findings thus reveal a novel antiviral mechanism of IFNs and provide a basis for a better understanding of HBV pathobiology.