Background: There are currently no effective treatments for outpatients with coronavirus disease. 2019 (COVID-19). Interferon-lambda-1 is a Type III interferon involved in the innate antiviral response with activity against respiratory pathogens. Methods: In this double-blind, placebo-controlled trial, outpatients with laboratory-confirmed COVID-19 were randomized to a single subcutaneous injection of peginterferon-lambda 180μg or placebo within 7 days of symptom onset or first positive swab if asymptomatic. The primary endpoint was proportion negative for SARS-CoV-2 RNA on Day 7 post-injection. Results: There were 30 patients per arm, with median baseline SARS-CoV-2 viral load of 6.71 (IQR 1.3-8.0) log copies/mL. The decline in SARS-CoV-2 RNA was greater in those treated with peginterferon-lambda than placebo (p=0.04). On Day 7, 24 participants (80%) in the peginterferon-lambda group had an undetectable viral load compared to 19 (63%) in the placebo arm (p=0.15). After controlling for baseline viral load, peginterferon-lambda treatment resulted in a 4.12-fold (95CI 1.15-16.7, p=0.029) higher likelihood of viral clearance by Day 7. Of those with baseline viral load above 10E6 copies/mL, 15/19 (79%) in the peginterferon-lambda group were undetectable on Day 7 compared to 6/16 (38%) in the placebo group (p=0.012). Adverse events were similar between groups with only mild reversible transaminase elevations more frequently observed in the peginterferon-lambda group. Conclusion: Peginterferon-lambda accelerated viral decline in outpatients with COVID-19 resulting in a greater proportion with viral clearance by Day 7, particularly in those with high baseline viral load. Peginterferon-lambda may have potential to prevent clinical deterioration and shorten duration of viral shedding. Trial Registration: NCT04354259 Funding Statement: This study was supported by the Toronto COVID-19 Action Initiative, University of Toronto and the Ontario First COVID-19 Rapid Research Fund. Medication was supplied by Eiger BioPharma. Declaration of Interests: JJF reports research support unrelated to this work from Eiger BioPharmaceuticals. BC has received research support unrelated to this work from Nubiyota LLC and Sanofi. IC and CH are employees of Eiger BioPharmaceuticals. JSG is a board member and founder of Eiger BioPharmaceuticals, Inc., in which he has an equity interest, and is an inventor on a patent application for the use of interferon lambda to treat coronavirus infections. All other authors have nothing to declare. Ethics Approval Statement: The Research Ethics Boards of all participating institutions approved the study, which was conducted under a Clinical Trial Application approved by Health Canada.