Interferon alpha (IFN-α) can be effective therapy for patients with chronic kidney disease who have chronic hepatitis C (HCV). However, acute allograft rejection has been reported in association with IFN-α following kidney transplantation, and therefore IFN therapy is recommended prior to, rather than after, kidney transplantation whenever feasible. The special case of repeat allograft recipients who contract HCV after the first transplantation presents special difficulties. This report features the case of a repeat allograft recipient who presented with neutropenic fevers after 5 months of pegylated IFN-α therapy, initiated 6 months following the functional loss of his third graft and the reinitiation of hemodialysis (HD). Physical exam, radiographic and laboratory findings led to allograft nephrectomy. The pathologic findings supported a diagnosis of acute-on-chronic rejection. This represents a rare case of IFN-α induced rejection following allograft failure and return to HD in a repeat allograft recipient. It also calls attention to the need for a high index of suspicion for the development of allograft rejection, which may require allograft nephrectomy even after allograft 'failure'.