Human T-lymphotropic virus type 1 (HTLV-1) is a retrovirus that persists lifelong in the host. In ∼4% of infected people, HTLV-1 causes a chronic disabling neuroinflammatory disease known as HTLV-1-associated myelopathy/tropical spastic paraparesis (HAM/TSP). The pathogenesis of HAM/TSP is unknown and treatment remains ineffective. We used gene expression microarrays followed by flow cytometric and functional assays to investigate global changes in blood transcriptional profiles of HTLV-1-infected and seronegative individuals. We found that perturbations of the p53 signaling pathway were a hallmark of HTLV-1 infection. In contrast, a subset of interferon (IFN)-stimulated genes was over-expressed in patients with HAM/TSP but not in asymptomatic HTLV-1 carriers or patients with the clinically similar disease multiple sclerosis. The IFN-inducible signature was present in all circulating leukocytes and its intensity correlated with the clinical severity of HAM/TSP. Leukocytes from patients with HAM/TSP were primed to respond strongly to stimulation with exogenous IFN. However, while type I IFN suppressed expression of the HTLV-1 structural protein Gag it failed to suppress the highly immunogenic viral transcriptional transactivator Tax. We conclude that over-expression of a subset of IFN-stimulated genes in chronic HTLV-1 infection does not constitute an efficient host response but instead contributes to the development of HAM/TSP.