The purpose of this study was to assess the cost-effectiveness of the treatment of chronic hepatitis C with interferon in Spain. Disease progression was studied using a Markov model through which an untreated cohort of 1000 patients was compared with cohorts treated with interferon 3 MU three times per week for 6, 12 or 18 months. Treatment cost, patients quality of life, and survival were the parameters evaluated. Using the perspective of the National Health System, an 18 month treatment with alfa interferon offers a better cost-effectiveness ratio than a treatment of 6 or 12 months duration. The age of the patient at the start of treatment is one of the most influential factors on the cost-effectiveness of treatment. In patients under 45 years of age, a net cost saving is observed with all treatment schedules, especially with 18 months treatment, due to significant reductions in severe complications of disease progression. In patients aged 45-60, 18 months treatment incurs a net cost, although important gains are made in survival and quality of life. In patients over 65 years of age, the economic benefits of prolonged treatment do not compensate the extra cost. In conclusion, treatment of chronic hepatitis C with alfa interferon should begin as early as possible, especially in young patients. In cases of favourable response, treatment should be extended to 18 months, in order to obtain a higher rate of sustained response, avoid progression of hepatic disease and achieve a more favourable cost-effectiveness ratio.