The present invention relates to hybrid interferon fusion proteins formed of an interferon-.alpha. protein where the C-terminal region of the interferon-.alpha. protein is replaced by a C-terminal region of interferon-.tau.. Also described are nucleic acid sequences encoding the interferon fusion proteins, expression vectors containing such sequences, and therapeutic applications of the interferon fusion proteins. The therapeutic applications include antiviral, anticellular proliferation, and anti-inflammatory applications. One advantage of the interferon fusion polypeptides of the present invention is that they have lower cytotoxic side effects when used to treat cells.