Interferon alpha (IFN) is the corner stone drug for the treatment of recurrent hepatitis C (HCV) in liver transplant (LT) recipients. One of its serious potential adverse effects is acute and chronic rejection. The aim of this study was to review our experience using IFN-based therapy, in order to examine the incidence and the risk factors for rejection, and the outcome of patients who developed rejection. Between September 1990 and December 2004, 70 LT recipients were treated. Patients started antiviral treatment 16 (1-137) months after LT. Histological follow-up was available in all patients according to protocol biopsies. Rejection was diagnosed and graded according to Banff classification. Twenty-one percent of patients developed acute rejection (5 mild, 9 moderate and 1 severe) during IFN-based therapy. Patients were treated for 8 (1-15) months prior to rejection. Previous history of acute rejection before IFN therapy and treatment with pegylated-IFN was significantly associated with rejection (p = 0.04 and p = 0.02, respectively). The rejection was successfully treated in 87% of patients. No chronic rejection or graft losses were observed. Acute rejection under IFN-based therapy often occurs in LT recipients, but early diagnosis with protocol biopsies and early treatment can lead to a favorable outcome.