Statement of the problem: Pakistan falls in the intermediate prevalence zones for HCV infection. Steatosis frequently affects the natural history of HCV infection and causes diagnostic confusion with fibrosis on ultrasound evaluation of liver. Objectives: · To determine the accuracy of ultrasound in diagnosis, severity grading and differentiation of steatosis from fibrosis in patients with HCV not responding to standard therapy of interferon and Ribavarin using histopathology as gold standard; · To compare the clinical, hematological and biochemical features between those with steatosis(S) and those without steatosis (NS). Methods: Patients with HCV not responding to Ribavarin-conventional interferon therapy were evaluated, from March 2008-August 2010 with ultrasound for detection and grading of steatosis and fibrosis using a standardized set of criteria. They later underwent liver biopsy, haematology, and serum biochemistry evaluation for detection of xix significant differences in S and NS groups. Statistical analysis was done on SPSS 19 using Chi square, t- test, ANOVA and Spearman correlation as applicable with significance at p>0.05. Sensitivity, specificity, negative and positive predictive values for ultrasound were determined using histopathology as the gold standard. Results: The overall accuracy for detection of steatosis was 95.39% and that for fibrosis was 98.02%. The specificity of ultrasound for diagnosing and grading the hepatic steatosis was 90.9% for no steatosis, 100% for both gross and moderate steatosis and 95.9% for mild steatosis. The specificity for fibrosis was 100% for no fibrosis, 96.07% for mild fibrosis, 89.18% for moderate fibrosis and 97.05% for gross fibrosis. Hepatic vein showed increased dampening of flow with advancing grades of steatosis and fibrosis. Mean BMI, serum Alanine transferase and serum Gamma GT levels were significantly higher and platelets were markedly lower among group S than the NS group. The rest of the clinical, sonographic and laboratory features were not markedly different. Conclusions: Ultrasound has a high accuracy in the diagnosis and grading of steatosis and fibrosis in HCV patients not responding to standard xx Ribavarin and interferon therapy. Presence of mild fibrosis can hide the presence of mild to moderate steatosis acting as a confounder. However reliable distinction is achievable in the more advanced grades of the condition despite coexistence.