Hepatitis C virus (HCV) is not usually cleared by our immune system, leading to the development of chronic hepatitis C infection. Chronic HCV induces the production of various cytokines, predominantly by Kupffer cells (KCs), and creates a pro-inflammatory state in the liver. The chronic dysregulated production of interferon (IFN) and other cytokines by KCs also promotes innate immune tolerance. Ribavirin (RBV) monotherapy has been shown to decrease inflammation in liver of patients with chronic hepatitis C. Sustained virological response (SVR) is significantly higher when IFN is combined with RBV in chronic HCV (cHCV) infection. However, the mechanism of their synergy remains unclear. Previous theories have attempted to explain the anti-HCV effect based on direct action of RBV alone on the virus or on the immune system; however, these theories have serious shortcomings. We propose that hemolysis, which universally occurs with RBV therapy and which is considered a limiting side effect, is precisely the mechanism by which the anti-HCV effect is exerted. Passive hemolysis results in anti-inflammatory/antiviral actions within the liver that disrupt the innate immune tolerance, leading to the synergy of RBV with IFN-α. Ribavirin-induced hemolysis floods the hepatocytes and KCs with heme, which is metabolized and detoxified by heme oxygenase-1 (HMOX1) to carbon monoxide (CO), biliverdin and free iron (which induces ferritin). These metabolites of heme possess anti-inflammatory and antioxidant properties. Thus, HMOX1 plays an extremely important anti-oxidant, anti-inflammatory and cytoprotective role, particularly in KCs and hepatocytes. HMOX1 has been noted to have anti-viral effects in hepatitis C infected cell lines. Additionally, it has been shown to enhance the response to IFN-α by restoring interferon-stimulated genes (ISGs). This mechanism can be clinically corroborated by the following observations that have been found in patients undergoing RBV/IFN combination therapy for cHCV: (1) SVR rates are higher in patients who develop anemia; (2) once anemia (due to hemolysis) occurs, the SVR rate does not depend on the treatment utilized to manage anemia; and (3) ribavirin analogs, such as taribavirin and levovirin, which increase intrahepatic ribavirin levels and which produce lesser hemolysis, are inferior to ribavirin for treating cHCV. This mechanism can also explain the observed RBV synergy with direct antiviral agents. This hypothesis is testable and may lead to newer and safer medications for treating cHCV infection.