This parallel group, open label study will evaluate the safety and efficacy of P egasys (peginterferon alfa-2a) versus untreated control in children (age 3 years to <18 years at baseline) with HBeAg positive chronic hepatitis B. Children wit hout advanced fibrosis and without cirrhosis will be randomized 2:1 to treatment Group A, receiving Pegasys 45-180 mcg subcutaneously weekly for 48 weeks, or to the untreated control Group B. Children with advanced fibrosis will be assigned to treatment group C and receive 48 weeks of treatment with Pegasys. Children i n the untreated control Group B who have not experienced seroconversion 48 weeks after randomization may enter the Switch Arm to receive 48 weeks of Pegasys tre atment. This offer will be available for 1 year following 48 weeks from randomiz ation. Anticipated time on study treatment is 48 weeks. All subjects will be fol lowed up for 5 years after the end of treatment (A,C,Switch)/principal observati on (B) period.