BACKGROUND: An increasing incidence of hepatitis C virus (HCV) infection in HIV-positive homosexual men has recently been described, but it is uncertain to what extent this reflects sexual transmission. We report prevalence, incidence and risk factors for HCV infection in community-based cohorts of HIV-negative and HIV-positive homosexual men in Sydney. METHODS: Both cohorts recruited participants using similar community-based strategies. Men underwent annual face-to-face interviews, and reported history of injecting-drug use (IDU) and sexual and other behaviours that might lead to blood contact. HCV screening was offered to consenting participants from 2001 to 2007. RESULTS: At baseline, HCV prevalence was 1.07% in the HIV-negative and 9.39% in the HIV-positive men. HCV seropositivity was strongly associated with a history of IDU in both cohorts (OR=56.18, 95% CI 12.55 to 251.5 in HIV-negative, and OR=24.46, 95% CI 5.44 to 110.0 in HIV-positive). In the HIV-negative cohort, five men seroconverted to HCV over 4412.1 person-years of follow-up, an incidence of 0.11 per 100 person-years (95% CI 0.03 to 0.26). Only one seroconverter reported IDU. Of the five, four reported sexual contact with HIV-positive men (HR=8.23, 95% CI 0.91 to 74.28), and two had an incident ulcerative sexually transmitted infection. In the HIV-positive cohort, none seroconverted over 238.1 person-years of follow-up (97.5% CI 0 to 1.54, single-sided). CONCLUSION: HCV prevalence was almost 10 times higher in HIV-positive homosexual men. Although incident HCV infection was uncommon in both cohorts, cases of non-IDU-related transmission did occur, possibly linked to sexual contact with HIV-positive men.