Lambda interferons (IFN-λs), type III interferons or interleukins 28 and 29 are the latest addition to the class II cytokine family. They share low homology with the interferon (IFN) and IL-10 cytokine families, yet they exhibit common and unique activities, the full spectrum of which still remains incompletely understood. Although initially described for their antiviral functions, it is now appreciated that IFN-λs also mediate diverse antitumor and immune-modulatory effects, and are key determinants of innate immunity at mucosal sites such as the gastrointestinal and respiratory tracks. Here, we are reviewing the biological functions of IFN-λs, the mechanisms controlling their expression, their downstream effects and their role in the maintenance of homeostasis and disease. We are also exploring the potential application of IFN-λs as novel therapeutics.