Major advances have been made in the therapy of chronic viral hepatitis B during the past several years. This period has witnessed the publication of large, multicenter trials of recombinant interferon alfa for chronic hepatitis B in the United States and the completion of several similarly designed studies in North America, Europe and Asia. These studies have defined an initial response rate of approximately 40% to 50%. In contrast to the experience with chronic hepatitis C, loss of viral replication is generally sustained. Repeat courses of therapy are likely to result in the same type of response as that observed initially. Quantitative assessment of viral replication (HBV DNA, HBeAg) is important in predicting the likelihood of response and in monitoring patients during therapy. Perhaps the most compelling reason to treat chronic hepatitis B with interferon is the disappearance of circulating HBsAg in one third of responders with a further increase in frequency of this phenomenon as follow-up continues. Another important advantage to treatment is the striking degree of histologic improvement that is frequently observed years after a response has been achieved. Although a substantial number of patients do not respond to interferon, several promising agents that should allow for a greater degree of success, when used either alone or in combination with interferon, are under study. A short course of corticosteroids prior to interferon appears to improve response rates in patients who have low ALT levels at baseline and has been the preferred approach for these patients at our medical center. Progress is being made in the development of safer interferon regimens for patients with mild-to-moderate hepatic decompensation. Nonetheless, even patients with marginal synthetic function, as reflected by albumin levels within the low-normal range, appear to be at greater risk for complications during therapy and should preferably be referred for inclusion in research programs. Appropriate patient selection remains a critical step for maximizing the safety as well as efficacy of interferon treatment.