Sustained hepatitis C virus (HCV) RNA clearance is achieved in 8 to 12% of patients with chronic HCV infection treated with alpha interferon (IFN-alpha) at the approved dose of 3 MU three times a week for 6 months and in about 25% of those receiving this treatment for 12 months. We used single-strand conformation polymorphism analysis combined with cloning and sequencing strategies to characterize the genetic evolution of HCV second envelope gene hypervariable region 1 (HVR1) quasispecies during and after IFN therapy in patients who failed to clear HCV RNA. Sustained HCV RNA clearance was achieved in 6% of patients. Profound changes in HVR1 quasispecies major variants were estimated to occur in 70% of the patients during and after therapy. These changes were evolutionary and were characterized by shifts in the virus population, related to selection and subsequent diversification of minor pretreatment variants. The quasispecies changes appeared to be induced by changes in the host environment likely resulting from the IFN-induced enhancement and post-IFN attenuation of neutralizing and possibly cytotoxic responses against HVR1. The remaining patients had no apparent changes in HVR1 quasispecies major variants, suggesting selection of major pretreatment variants, but some changes were observed in other genomic regions. We conclude that IFN-alpha administration and withdrawal profoundly alters the nature of circulating HCV quasispecies, owing to profound changes in virus-host interactions, in patients in whom sustained HCV RNA clearance fails to occur. These changes are associated with profound alterations of the natural outcome of HCV-related liver disease, raising the hypothesis of a causal relationship.