The natural history of hepatitis C virus (HCV) infection following liver transplantation and predictors of disease severity remain controversial. The aims of the study were to assess in a homogeneous population of 81 cyclosporine-based HCV-infected liver transplant recipients mostly infected with genotype 1b and undergoing strict protocol annual biopsies: 1) the histological progression of posttransplantation HCV disease and, in particular, the incidence of HCV-related graft cirrhosis within the first 5 years after surgery; and 2) the relationship between progression to cirrhosis and i) rejection episodes and ii) first-year liver biopsy findings. We studied 81 consecutive HCV-RNA–positive patients (96% genotype 1b) undergoing liver transplantation between 1991 and 1996 with a minimum histological follow-up of 1 year. All patients received cyclosporine-based immunosuppression and underwent protocol yearly liver biopsies for the first 5 years. The mean histological follow-up was 32 months (range, 12-60 months). Biopsies were scored according to the histological activity index (HAI), with separate evaluation of grade (activity) and stage (fibrosis). Histological hepatitis, present in 97% of patients in the most recent biopsy, was moderate or severe in 64%. Twelve patients developed HCV-related cirrhosis at a median time of 24 months (range, 12-48 months), with an actuarial rate of HCV-cirrhosis of 3.7%, 8.5%, 16%, 28%, and 28% at 1, 2, 3, 4, and 5 years, respectively. Rejection was significantly more common among patients with cirrhosis versus those without (83% vs. 48%; P = .02), with an association between the incidence of cirrhosis and the number of rejection episodes: 5%, 15%, and 50% in patients without rejection, one and two episodes, respectively (P = .001). The degree of activity and fibrosis score in the first-year biopsy were higher in patients who developed cirrhosis than in those who did not (P = .008 and .18, respectively). In conclusion, HCV genotype 1b–infected liver recipients are at a high risk of developing graft cirrhosis in the first 4 to 5 years following transplantation, especially those with previous rejection episodes. First-year liver biopsies may help to sooner identify patients at the highest risk, improving further patient management.