Infection with the hepatitis C virus (HCV) is a leading cause of chronic liver disease world-wide. This paper examines our current understanding of the complex relationship between HCV and its host, especially potential mechanisms of viral persistence and resistance to interferon therapy, and the pathogenesis of liver injury in chronic HCV infection. HCV infection leads to viral persistence and chronic disease in a very high proportion of cases, despite broad humoral and cellular immunological responses to viral proteins. These responses may be thwarted by the high rate of mutation, which leads to the generation of a highly variable mixture of closely related genomes, referred to as a quasispecies, that persists and continuously evolves in infected individuals. Understanding this, and other mechanisms of viral persistence and immune escape, will be essential in developing effective future therapeutic and preventive strategies. As far as the pathogenesis of chronic hepatitis C is concerned, two non-mutually exclusive hypotheses have been raised: first, that HCV can be cytopathic and induce liver lesions by replicating in infected hepatocytes, and second, that liver lesions could be the result of specific or non-specific immune responses. In the absence of a cell-culture model, the direct cytopathogenicity of the virus cannot be assessed confidently. Recent data suggest that cytotoxic T cells and cytokines produced by both CD4+ (T helper) and cytotoxic T cells may be responsible for much of the damage that occurs in the livers of infected patients.