A retrospective multicenter analysis of 652 patients with chronic hepatitis C who have been treated with interferon (IFN) was performed to assess the effects of IFN on the clinical course and development of HCC. During a mean follow-up of 54.8 months, hepatocellular carcinoma (HCC) developed in 7.0% of the patients. The rate was significantly higher in the patients who did not respond to IFN treatment than in those with sustained virological response and those who obtained a normalization of alanine aminotransferase levels despite the presence of HCV RNA (incomplete response) (P < 0.01). Using multivariate Cox's proportional hazard model, alcohol abuse (P < 0.05) and a higher level of fibrosis (P < 0.05) before treatment were the significant background factors associated with HCC development in the patients who did not respond to IFN. Interestingly, a significant increase in the rate of HCC development occurred in patients who had a histological finding of progressive fibrosis (F3). In addition, patients with low histological staging scores were likely to have an incomplete response, even if a sustained virological response was not obtained. IFN produced an improvement in histological activity and fibrosis stage in the second biopsy specimens irrespective of the clinical outcome when compared against untreated subjects.