Recent identification of IL28B gene polymorphisms associated with hepatitis C virus (HCV) clearance suggests a role for type III interferons (IFNs) in hepatitis C infection. The function of type III IFNs in intrinsic antiviral immunity is poorly understood. Here we show that HCV infection of primary human hepatocytes results in a robust induction of type III but not type I IFNs, leading to IFN- stimulated gene (ISG) expression. In addition, HCV infection elicits a much broader range of gene expression alterations in addition to ISG induction. The induction of type III IFNs is mediated by IRF3 and NFkB- dependent pathways. Type III IFN, aside from upregulating ISGs with a different kinetic profile, induces a distinct set of genes from type I IFN, potentially explaining the functional difference between the two types of IFNs. Chimpanzees undergoing experimental HCV infection demonstrated a prompt hepatic induction of IL28, associating with ISG upregulation, but minimal type I IFN induction. Analysis of liver biopsies from HCV-infected patients supported a close correlation among hepatic expression of IL28 and ISGs, but not with type I IFNs. Our study demonstrates that HCV infection results predominantly in type III IFN induction in the liver and the level of induction correlates with hepatic ISG levels, thus providing a mechanistic explanation for the association between IL28, ISG levels and recovery from HCV infection as well as a potential therapeutic strategy for the treatment of non-responders.