Transforming growth factor (TGF)-β inhibits hepatitis B virus (HBV) replication although the intracellular effectors involved are not determined. Here, we report that reduction of HBV transcripts by TGF-β is dependent on AID expression, which significantly decreases both HBV transcripts and viral DNA, resulting in inhibition of viral replication. Immunoprecipitation reveals that AID physically associates with viral P protein that binds to specific virus RNA sequence called epsilon. AID also binds to an RNA degradation complex (RNA exosome proteins), indicating that AID, RNA exosome, and P protein form an RNP complex. Suppression of HBV transcripts by TGF-β was abrogated by depletion of either AID or RNA exosome components, suggesting that AID and the RNA exosome involve in TGF-β mediated suppression of HBV RNA. Moreover, AID-mediated HBV reduction does not occur when P protein is disrupted or when viral transcription is inhibited. These results suggest that induced expression of AID by TGF-β causes recruitment of the RNA exosome to viral RNP complex and the RNA exosome degrades HBV RNA in a transcription-coupled manner.