Interferon lambdas (IFN-λ) are Type III interferons with biological activity, including induction of antiviral genes, similar to Type I IFNs, but signal through a distinct receptor complex. The expression pattern for the IFN-λ receptor is more cell specific than the widely distributed IFN-α receptor, suggesting in vivo, IFN-λ may have fewer side effects than IFN-α, such as less hematologic toxicities. A PEGylated form of IFN-λ (PEG-rIL-29) was well tolerated in animals and did not result in hematologic toxicity. Clinical data from initial studies of PEG-rIL-29 has demonstrated antiviral effects in patients with hepatitis C without producing hematologic toxicity. These preclinical and early clinical data support PEG-rIL-29 as a potential new therapeutic agent for treatment of patients with hepatitis C.