Background & Aims: Pegylated interferon (IFN)-α plus ribavirin is the most effective treatment of chronic hepatitis C but has unpleasant side effects and high costs. A large proportion of patients do not respond to therapy for reasons that are unclear. We used gene expression profiling to investigate the molecular basis for treatment failure. Methods: Expression profiling was performed on percutaneous needle liver biopsy specimens taken before therapy. Gene expression levels were compared among 15 nonresponder, 16 responder, and 20 normal liver biopsy specimens. Differential gene expression was confirmed using real-time polymerase chain reaction. Results: We identified 18 genes whose expression differed significantly between all responders and all nonresponders ( P < .005). Many of these 18 genes are IFN sensitive and 2 (ISG15/USP18) are linked in a novel IFN-regulatory pathway, suggesting a possible rationale for treatment resistance. Using a number of independent classifier analyses, an 8-gene subset accurately predicted treatment response for 30 of 31 patients. The classifier analyses were applicable to patients with genotype 1 infection and were not correlated with viral load, disease activity, or fibrosis. Conclusions: Hepatic gene expression profiling identified consistent differences in patients who subsequently fail treatment with pegylated IFN-α plus ribavirin: up-regulation of a specific set of IFN-responsive genes predicts nonresponse to exogenous therapy. These data may be of use in predicting clinical responses to treatment.