The response of serum prednisolone to a single oral dose of 30 mg of prednisone was studied in 12 patients with chronic active hepatitis taking prednisone, and in six healthy volunteers. Five of the 12 patients developed major side effects with prednisone, and seven showed less or no side effects. The patients with major side effects generally had higher serum bilirubin and lower serum albumin levels than the others. Prednisolone peak levels were similar in the three groups. Unbound (free) serum prednisolone was higher at 2, 3, 4, and 8 hours, in patients with chronic active liver disease and major side effects, than in the other two groups. Studies in vitro showed that protein binding of prednisolone increased with increasing albumin concentrations, and that bilirubin could displace some bound prednisolone. We suggest that the association between major side effects, hypoalbuminemia, and hyperbilirubinemia in patients with chronic active hepatitis is attributable to increased serum unbound prednisolone caused by: 1) limited availability of binding sites (hypoalbuminemia), or 2) displacement of bound steroid by competition (hyperbilirubinemia).