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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.