Following integration of human papillomavirus (HPV) into the host genome, overexpression of the viral oncogenes E6 and E7 requires loss of the transcriptional repressor functions of E2. A key step in HPV-related carcinogenesis is therefore clearance of residual viral episomes, which encode E2. As spontaneous loss of HPV-16 episomes in vitro is associated with increased expression of antiviral genes inducible by type I interferon (IFN), we used the W12 model to examine the effects of exogenous IFN-beta on cervical keratinocytes containing HPV-16 episomes as a result of 'natural' infection in vivo. In contrast to studies of cells transfected with HPV-31 or bovine papillomavirus, IFN-beta caused rapid reduction in numbers of HPV-16 episomes. This was associated with the emergence of cells bearing previously latent integrants, in which there was increased expression of E6 and E7. Our data indicate that integrated HPV-16 can exist in a minority of cells in a mixed population without exerting a selective advantage until episome numbers are reduced. The kinetics of cell death and changes in viral transcription and translation that we observed support a model where integrants are initially present in cells also containing episomes, with generalized episome clearance by IFN-beta resulting in integrant de-repression. We conclude that IFN-beta can hasten the transition from episomal to integrated HPV-16 in naturally infected cervical keratinocytes. Greater emphasis should be placed on episome loss in models of HPV-related carcinogenesis. We provide the strongest evidence to date that treating HPV-16 lesions by inducing an IFN response may cause clinical progression.