Ongoing hepatitis B virus replication in the presence of antibody to HBeAg can be observed in patients with active liver disease. These forms of chronic hepatitis B have been described as having a poor prognosis. We have conducted a randomized controlled trial to assess the efficacy of lymphoblastoid interferon-alpha in 60 patients with antibody to HBeAg and hepatitis B virus DNA-positive chronic hepatitis. Patients received 5 million U/m2 interferon three times a week for 6 mo, or no treatment. Final evaluation 18 mo after randomization showed hepatitis B virus DNA negativity and ALT normalization in 53% of treated patients and in 17% of controls (p less than 0.01). The probability of sustained hepatitis B virus DNA loss was significantly higher in treated patients than in controls (p less than 0.005). Blinded histological assessment revealed improvement in 50% of treated patients compared with 33% of controls. Pretreatment hepatitis B virus DNA and aminotransferase levels and histological appearance were not predictive of response. The results of this trial indicated that marked reduction of viral replication in serum and remission of liver damage can be obtained with lymphoblastoid interferon in about 50% of patients with HBeAg antibody- and HBV DNA-positive chronic hepatitis. This rate of response is higher than that reported previously.