Perinatal infection with hepatitis C virus (HCV) is characterized by a wide range of alanine aminotransferase (ALT) levels. The mechanisms responsible for this variability are unknown. We examined whether the evolution of the HCV quasispecies was associated with different ALT profiles in perinatally infected children. Sequences within HCV envelope 1 and 2 genes, inclusive of the hypervariable region 1, the viral load, and the nascent humoral immunity were analyzed in serial serum samples from 12 perinatally infected children prospectively followed for a median of 53 months. These patients were selected to represent two different ALT patterns during the first year of life: 6 had high levels (maximum values ranging from 4.2 to 30 times the normal upper limit), and 6 had normal or slightly elevated levels (< 2 times the normal upper limit). Two patterns of viral evolution were identified according to the ALT profiles. Biochemical evidence of hepatic injury was invariably associated with a mono- or oligoclonal viral population, whereas mild or no liver damage correlated with the early emergence of a heterogeneous viral quasispecies. Consistent with selective immune pressure, amino acid changes occurred almost exclusively within the hypervariable region 1 and were temporally associated with antibody seroconversion; at this time, the difference in genetic diversity between the two groups was highly significant (P = 0.002). The two patterns of viral evolution persisted over time and did not correlate with viral load or genotype. Our study demonstrates that, in perinatally infected children, the evolution of HCV quasispecies correlates with hepatic injury. The sequences reported in this paper have been deposited in the GenBank database (accession nos. DQ 504441-DQ 507112).