Clinical applications of Type I interferon (IFN) are limited by adverse side effects mediated largely by unknown mechanisms. This study examined the mechanisms of acute hepatic injury in lambs treated with systemic administration of IFN-τ, a Type I IFN. Liver tissues were collected at 24, 48, or 96 hours after treatment with either IFN-τ or saline. Histopathology revealed acute hepatopathy including cellular swelling, cytoplasmic aggregates, and apoptosis in all IFN-τ–treated lambs, which were accompanied by elevation of aspartate transaminase (AST) (P < .01). The number of apoptotic hepatocytes in IFN-τ–treated lambs was higher than for control lambs (P < .001). Immunohistochemistry for proliferating cell nuclear antigen (PCNA) revealed that IFN-τ induced hepatocyte growth arrest at the G0/G1 phase of the cell cycle and that the majority of hepatocytes in S or G2 phase were eliminated by apoptosis. We investigated expression of bax-α and bcl-2, acting as pro- and antiapoptotic molecules, in IFN-τ–induced apoptosis. Northern blot analysis revealed increased expression of bax-α messenger RNA (mRNA) in IFN-τ–treated lambs (P < .01) compared with control lambs, consistent with the expression pattern for bax-α protein. However, there was no detectable difference in expression of bcl-2 proteins between control and IFN-τ–treated lambs. The levels of bax-α associated with the mitochondria also increased during IFN-τ treatment. Bax-α immunostaining showed scattered immunoreactive hepatocytes with morphological hallmarks of apoptosis. These results suggest that IFN-τ induces growth arrest as well as apoptosis by regulating bax-α expression. These pathological effects of IFN-τ on sheep liver indicate potential mechanisms of Type 1 IFN–induced hepatotoxicity in animals and humans.