Achieving atomic-level accuracy in comparative protein models is limited by our ability to refine the initial, homolog-derived model closer to the native state. Despite considerable effort, progress in developing a generalized refinement method has been limited. In contrast, methods have been described that can accurately reconstruct loop conformations in native protein structures. We hypothesize that loop refinement in homology models is much more difficult than loop reconstruction in crystal structures, in part, because side-chain, backbone, and other structural inaccuracies surrounding the loop create a challenging sampling problem; the loop cannot be refined without simultaneously refining adjacent portions. In this work, we single out one sampling issue in an artificial but useful test set and examine how loop refinement accuracy is affected by errors in surrounding side-chains. In 80 high-resolution crystal structures, we first perturbed 6–12 residue loops away from the crystal conformation, and placed all protein side chains in non-native but low energy conformations. Even these relatively small perturbations in the surroundings made the loop prediction problem much more challenging. Using a previously published loop prediction method, median backbone (N-Cα-C-O) RMSD's for groups of 6, 8, 10, and 12 residue loops are 0.3/0.6/0.4/0.6 Å, respectively, on native structures and increase to 1.1/2.2/1.5/2.3 Å on the perturbed cases. We then augmented our previous loop prediction method to simultaneously optimize the rotamer states of side chains surrounding the loop. Our results show that this augmented loop prediction method can recover the native state in many perturbed structures where the previous method failed; the median RMSD's for the 6, 8, 10, and 12 residue perturbed loops improve to 0.4/0.8/1.1/1.2 Å. Finally, we highlight three comparative models from blind tests, in which our new method predicted loops closer to the native conformation than first modeled using the homolog template, a task generally understood to be difficult. Although many challenges remain in refining full comparative models to high accuracy, this work offers a methodical step toward that goal. Proteins 2008. © 2008 Wiley-Liss, Inc.