Approximately 4 million Americans are chronically infected with the hepatitis C virus (HCV). Compared with the general U.S. population, patients with HCV have a higher prevalence of psychiatric illness, and patients with severe mental illness have four to nine times the prevalence of HCV. The use of interferon-alpha (IFN) to eradicate HCV has been associated with frequent neuropsychiatric adverse effects (e.g., affective, anxiety, cognitive, and psychotic symptoms) that compromise the management of HCV patients with and without a preexisting history of psychiatric illness. Psychiatric symptoms often result in the interruption, dose reduction, or cessation of IFN therapy, which makes treatment of patients with comorbid HCV and psychiatric illness a challenge. IFN can be safely administered to psychiatric patients with HCV but requires a comprehensive pretreatment assessment, a risk-benefit analysis, and ongoing psychiatric follow-up. This review summarizes the psychiatric implications of HCV infection and strategies for the management of IFN-induced neuropsychiatric adverse effects.