The evolution of hepatitis C virus (HCV) envelope variation was studied using a liver-transplant model to evaluate the role of HCV quasispecies for hepatocyte infection. Twelve HCV polymerase chain reaction (PCR)-positive liver-transplant recipients (6 with posttransplantation biochemical hepatitis and 6 without hepatitis [controls]) were prospectively evaluated and underwent detailed quasispecies analysis of pre- and postoperative serum samples. HCV amino acid sequence diversity and complexity at the first hypervariable region (HVR1) of the second envelope protein (E2) was correlated with outcome. Recurrence of HCV-induced allograft injury was defined by persistently elevated serum alanine transaminase (ALT) levels. The major variant (sequences >10% of all clones) of recipients with hepatitis accounted for a significantly smaller percent of all preoperative clones compared with controls (41% ± 6% vs. 69% ± 8%; P < .015). Recipients with hepatitis had an increased number of pretransplantation major variants (2.5 ± 0.3 vs. 1.1 ± 0.2; P < .006). Eighty-three percent of controls had a predominant variant (accounting for >50% of clones) compared with 17% of those with recurrence (P < .05). These differences did not persist postoperatively. In addition, recipients without a pretransplantation predominant variant demonstrated an increased allograft fibrosis score (2.3 ± 0.3 vs. 0.5 ± 0.3; P < .015) at 181 to 360 days posttransplantation compared with those in whom a predominant variant was present. Increased HCV envelope complexity may act as a stronger antigenic stimulus or improve hepatocyte receptor binding and lead to allograft hepatitis and fibrosis. Although pretransplantation differences in HCV quasispecies did not persist postoperatively, pretransplantation quasispecies may be a predictor of HCV-induced hepatitis and graft fibrosis after liver transplantation.