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Moderate elevations of serum transaminases are frequently found in patients with diabetes mellitus and are often attributed to fatty infiltration of the liver without further investigation. Recent studies of patients with end-stage liver disease have suggested a possible association between Hepatitis C virus (HCV) antibody positivity and the development of diabetes (mostly Type 2). As a first step in the examination of any potential association between HCV and Type 2 diabetes in subjects without overt liver disease, we examined 200 British patients with Type 2 diabetes (100 White Caucasians, 50 Asians, and 50 Afro-Caribbeans), recruited from the United Kingdom Prospective Study of Diabetes, half of whom had a significant elevation of alanine aminotransferase (ALT) on at least two occasions and half of whom had consistently normal ALT levels. In Afro-Caribbean Type 2 diabetic subjects 7/25 (28%) patients with abnormal ALT and 1/25 (4%) with normal ALT were HCV antibody positive. Among White Caucasian subjects 6/50 (12%) patients with abnormal LFTs and 0/50 with normal LFTs were HCV antibody positive and in Asians the prevalence was 2/25 (8%) and 0/25, respectively. This study suggests that persistent mild to moderate elevation of serum transaminases in a patient with Type 2 diabetes should not automatically be attributed to the metabolic disturbances of diabetes. Particularly in Afro-Caribbean subjects, HCV infection is a major diagnostic consideration. The question of whether HCV infection itself may have a diabetogenic action is worthy of further investigation.