Different mechanisms have been proposed for the failure of interferon (IFN) therapy in patients with chronic hepatitis C and multiple sclerosis, for example, the presence of IFN-neutralizing antibodies. In this study, a novel assay system based on the IFN-inducible Mx-promoter was used to detect IFN-neutralizing antibodies in sera of patients with chronic hepatitis C. To monitor IFN bioactivity in IFN-treated patients, a real-time RT-PCR for MxA gene expression in PBMCs was established. Using these two methods, patients with chronic hepatitis C virus (HCV) infection receiving IFN therapy and patients with treatment induced HCV clearance were monitored. Importantly, neutralizing anti-IFN antibodies were detected in the sera of 3 of 38 chronically HCV-infected patients who failed to respond to therapy but none in sera of patients who cleared HCV after IFN therapy. Interestingly, the presence of these antibodies correlated with the lack of MxA induction in PBMCs after initiation of IFN-α therapy. Retrospective analysis of one patient's sera revealed that the anti-IFN-α antibodies had already developed after the first of four unsuccessful IFN therapies, suggesting that neutralizing antibodies may have contributed to the failure of previous IFN treatments. In summary, a novel screening assay was established that may be helpful for testing IFN non-responders for the presence of clinically relevant anti-IFN-α antibodies and for selecting alternative IFN preparations not neutralized by these antibodies. J. Med. Virol. 78:74–82, 2006. © 2005 Wiley-Liss, inc.