OBJECTIVES: To determine whether combined therapy with interferon-alpha and ribavirin was more effective and cost-effective than no treatment for patients with mild chronic hepatitis C. DESIGN: A multicentre, randomised, controlled, non-blinded trial assessed the efficacy of combination therapy. A Markov model used these efficacy data combined with data on transition probabilities, costs and health-related quality of life (HRQoL) to assess the lifetime cost-effectiveness of the intervention. SETTING: A multicentre NHS setting. PARTICIPANTS: Treatment-naive, adult patients with histologically mild chronic hepatitis C (Ishak necroinflammatory scores <4 and fibrosis scores <3 on liver biopsy). INTERVENTIONS: Patients were randomised to receive interferon-alpha and ribavirin for 48 weeks or no treatment (control). MAIN OUTCOME MEASURES: The primary outcome measure was the proportion of patients having a sustained virological response (SVR), measured at 6 months after cessation of therapy. Secondary outcome measures were: the ability of early phase kinetics to predict the eventual outcome of treating mild disease; HRQoL measured using the Short Form 36 and EuroQol (5 Dimensions) questionnaires, and the cost per quality-adjusted life-year (QALY) of interferon-alpha and ribavirin for mild disease compared with no treatment. RESULTS: In the treatment group, 32 out of 98 patients (33%) achieved an SVR. Patients infected with genotype 1 had a lower SVR than those infected with genotype non-1 (18% versus 49%, p = 0.02). No patients who failed to achieve a 2-log drop in viral load at 12 weeks achieved an SVR. HRQoL fell during treatment and rose with treatment cessation. For patients having an SVR there were modest improvements in HRQoL at 6 months post-treatment. The mean cost per QALY gained was 4535 pounds sterling for 40-year-old patients with genotype non-1 and 25,188 pounds sterling for patients with genotype 1. For patients with genotype 1 aged 65, providing interferon-alpha and ribavirin for mild disease led to fewer QALYs gained, and a mean cost per QALY of 53,017 pounds sterling. The model using efficacy estimates from the literature, showed that the cost per QALY gained from providing pegylated interferon alpha-2b and ribavirin at a mild stage rather than a moderate stage was 7821 pounds sterling for patients with genotype non-1 and 28,409 pounds sterling for patients with genotype 1. CONCLUSIONS: Based on the evidence collected in this study, interferon-alpha and ribavirin treatment for mild chronic hepatitis C patients is in general cost-effective at the 30,000 pounds sterling per QALY threshold previously used by policy-makers in the NHS. For patients with chronic hepatitis C aged 65 or over with genotype 1, antiviral treatment at a mild stage does not appear cost-effective. Further research is required on the cost-effectiveness of pegylated interferon and ribavirin, in particular the intervention's long-term impact on HRQoL and health service costs requires further evaluation. Further research is also needed to develop predictive tests, based on pharmacogenomics, that can identify those cases most likely to respond to antiviral therapy. Liver biopsy before treatment no longer appears justified apart from for older patients (aged 65 or over) with genotype 1. However, further research should monitor the impact this strategy would have on costs and outcomes.