The emergence of compensatory mutations in the polymerase gene of drug resistant hepatitis B virus (HBV) is associated with treatment failure. We previously identified a multi-drug resistant HBV mutant, which displayed resistance towards lamivudine (LMV), clevudine (CLV), and entecavir (ETV), along with a strong replication capacity. The aim of this study was to identify the previously unknown compensatory mutations, and to determine the clinical relevance of this mutation during antiviral therapy. In vitro mutagenesis, drug susceptibility assay, and molecular modeling studies were performed. The rtL269I substitution conferred 2- to 7-fold higher replication capacity in the wild-type (WT) or YMDD mutation backbone, regardless of drug treatment. The rtL269I substitution alone did not confer resistance to LMV, ETV, adefovir (ADV), or tenofovir (TDF). However, upon combination with YMDD mutation, the replication capacity under LMV or ETV treatment was enhanced by several folds. Molecular modeling studies suggested that the rtL269I substitution affects template binding, which may eventually lead to the enhanced activity of rtI269-HBV polymerase in both WT virus and YMDD mutant. The clinical relevance of the rtL269I substitution was validated by its emergence in association with YMDD mutation in chronic hepatitis B (CHB) patients with sub-optimal response or treatment failure to LMV or CLV. Our study suggests that substitution at rt269 in HBV polymerase is associated with multi-drug resistance, which may serve as a novel compensatory mutation for replication-defective multi-drug resistant HBV.