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Recombinant interferon-alpha (IFN-α) is an approved therapy for chronic hepatitis B (CHB), but the molecular basis of treatment response remains to be determined. The woodchuck model of chronic hepatitis B virus (HBV) infection displays many characteristics of human disease and has been extensively used to evaluate antiviral therapeutics. In this study, woodchucks with chronic woodchuck hepatitis virus (WHV) infection were treated with recombinant woodchuck IFN-α (wIFN-α) or placebo (n = 12/group) for 15 weeks. Treatment with wIFN-α strongly reduced viral markers in the serum and liver in a subset of animals, with viral rebound typically being observed following cessation of treatment. To define the intrahepatic cellular and molecular characteristics of the antiviral response to wIFN-α, we characterized the transcriptional profiles of liver biopsies taken from animals (n = 8–12/group) at various times during the study. Unexpectedly, this revealed that the antiviral response to treatment did not correlate with intrahepatic induction of the majority of IFN-stimulated genes (ISGs) by wIFN-α. Instead, treatment response was associated with the induction of an NK/T cell signature in the liver, as well as an intrahepatic IFN-γ transcriptional response and elevation of liver injury biomarkers. Collectively, these data suggest that NK/T cell cytolytic and non-cytolytic mechanisms mediate the antiviral response to wIFN-α treatment. In summary, by studying recombinant IFN-α in a fully immunocompetent animal model of CHB, we determined that the immunomodulatory effects, but not the direct antiviral activity, of this pleiotropic cytokine are most closely correlated with treatment response. This has important implications for the rational design of new therapeutics for the treatment of CHB., Author Summary Approximately 250 million people are chronically infected with HBV, and over 500,000 people die every year because of associated liver diseases. IFN-α has been used to treat patients with chronic HBV infection for over 20 years, but it is not well understood why some patients respond to treatment and others do not. In large part, this is because it is not practicable to obtain liver samples to characterize the intrahepatic response to IFN-α in patients with different treatment outcomes. In this study we used the woodchuck model of chronic HBV infection to study how IFN-α changes gene expression patterns in the liver during treatment. Surprisingly, we found that the treatment response did not correlate with the expression of antiviral effector genes that have previously been shown to mediate the direct antiviral effects of IFN-α in vitro. Instead, we found that the response to IFN-α treatment was associated with the presence of select immune cells (natural killer cells and T cells) in the liver. Our work also indicates that these immune cells inhibit the virus by killing infected cells, as well as in ways that do not require killing of liver cells. Altogether, our study suggests that new therapies that stimulate these immune cells in the liver may hold promise for the treatment of chronic HBV infection.