Interferon (IFN)-lambda1, -2 and -3 (also designated as interleukin (IL)-29, IL-28alpha and IL-28beta) represent a new subfamily within the class II cytokine family. They show type I IFN-like antiviral and cytostatic activities in affected cells forming the basis for IFN-lambda1 therapy currently under development for hepatitis C infection. However, many aspects of IFN-lambdas are still unknown. This study aimed at identifying the target cells of IFN-lambdas within the immune system and the skin. Among skin cell populations, keratinocytes and melanocytes, but not fibroblasts, endothelial cells or subcutaneous adipocytes turned out to be targets. In contrast to these target cells, blood immune cell populations did not clearly respond to even high concentrations of these cytokines, despite an IFN-lambda receptor expression. Interestingly, immune cells expressed high levels of a short IFN-lambda receptor splice variant (sIFN-lambdaR1/sIL-28R1). Its characterization revealed a secreted, glycosylated protein that binds IFN-lambda1 with a moderate affinity (K(D) 73 nM) and was able to inhibit IFN-lambda1 effects. Our study suggests that IFN-lambda therapy should be suited for patients with verrucae, melanomas and non-melanoma skin cancers, apart from patients with viral hepatitis, and would not be accompanied by immune-mediated complications known from type I IFN application.