BACKGROUND Beginning in 1994, Vancouver experienced an explosive outbreak of HIV infection among injection drug users (IDUs). The objectives of this study were to measure the prevalence and incidence of hepatitis C virus (HCV) infection in this context and to examine factors associated with HCV seroconversion among IDUs. METHODS IDUs recruited through a study site and street outreach completed interviewer-administered questionnaires covering subjects' characteristics, behaviour, health status and service utilization and underwent serologic testing for HIV and HCV at baseline and semiannually thereafter. A Cox proportional hazards model was used to identify independent correlates of HCV seroconversion. RESULTS As of Nov. 30, 1999, 1345 subjects had been recruited into the study cohort. The prevalence of anti-HCV antibodies was 81.6% (95% confidence interval [CI] 79.6% to 83.6%) at enrollment. Sixty-two HCV seroconversions occurred among 155 IDUs who were initially HCV negative and who returned for follow-up, for an overall incidence density rate of 29.1 per 100 person-years (95% CI 22.3 to 37.3). The HCV incidence remained above 16 per 100 person-years over 3 years of observation (December 1996 to November 1999), whereas HIV incidence declined from more than 19 to less than 5 per 100 person-years. Independent correlates of HCV seroconversion included female sex, cocaine use, injecting at least daily and frequent attendance at a needle exchange program. CONCLUSIONS Because of high transmissibility of HCV among those injecting frequently and using cocaine, the harm reduction initiatives deployed in Vancouver during the study period proved insufficient to eliminate hepatitis C transmission in this population.