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To characterize the mode of hepatitis C virus (HCV) transmission in a recent epidemic of acute HCV in HIV-infected individuals using linked molecular and clinical epidemiological studies.Individuals diagnosed with acute HCV between 1999 and 2005 at three urban HIV units in the UK were enrolled into a phylogenetic and case–control study. Phylogenetic trees were constructed from the amplified sequences of the E1/E2 region of the HCV genome and were used to compare cases with unrelated sequences. A questionnaire-based, case–control study using matched controls recruited from each HIV unit identified putative transmission factors.One hundred and eleven HIV-positive men who have sex with men with acute HCV (genotype 1: 84%) were enrolled. Phylogenetic analysis of 93 E1/E2 sequences revealed seven monophyletic clusters signifying multiple independent HCV lineages co-circulating in the HIV-positive population. Permucosal rather than percutaneous transmission factors were associated with case/control status. Cases (n = 60) had more sexual partners, increased levels of high-risk sexual behaviour and were more likely to have shared drugs via a nasal or anal route in the preceding year in comparison with controls (n = 130). Sex in a group of more than two people was the strongest predictor of case/control status; odds ratios associated with participation in two or at least three types of high-risk sexual behaviour in a group were 9.16 (95% confidence interval, 3.51–23.90) and 23.50 (95% confidence interval, 9.47–58.33), respectively.The identified co-circulating HCV lineages belong to different subtypes and genotypes, implying that rather than viral change, the epidemic is due to permucosal transmission factors that should be the focus of public health interventions.