Identifying newly acquired hepatitis C infections and describing their epidemiological characteristics has public health importance but can be resource intensive. We developed a new approach to conducting surveillance for newly acquired hepatitis C infection and analysed the epidemiological findings and health service implications. Doctors and laboratories in the Australian state of Victoria are required by law to notify all hepatitis C diagnoses to the Department of Human Services, but the routine report is limited to basic demographic information. For all cases reported as being aged 16-19 years or having clinical or laboratory indicators of newly acquired infection, during the period July 2004 to December 2005, additional information was sought from diagnosing doctors and used to classify cases as 'newly acquired' or 'unspecified' using a standard case definition. Of the 4,561 hepatitis C notifications received by the Department during the study period, 415 (9%) were selected for follow up and 148 of these (36%) were classified as newly acquired infections, compared with 4%-10% achieved from previous systems. Based on the enhanced data collection, the most common risk factor for transmission among newly acquired infections was injecting drug use (86%), the median age was 23 years, 59% were males and the predominant reason for testing was drug and alcohol screening (32%). This surveillance system was much more efficient at detecting newly acquired cases of hepatitis C infection than other approaches used in Victoria. Initial results show that injecting drug use continues to be by far the predominant mode of hepatitis C transmission in Victoria.