Type III interferons (IFN-λs) are cytokines that share a common signaling pathway, downstream target genes, antiviral and antiproliferative activities with type I IFNs, but drive these processes with less potency and via different cell surface receptors. The intrinsically low-affinity of IL-10Rβ, one of the two cognate IFN-λ receptors, was believed to be a limiting factor to crystallizing the wild-type signaling complex. Here, we report the crystal structure of the IFN-λ receptor ternary complex enabled by the in vitro evolution of a high-affinity IFN-λ to stabilize the complex. Structural and sequence analyses provide insights on the mechanism of IL-10Rβ engagement with IFN-λ and other IL-10 cytokines. We harnessed the enhanced affinity of our engineered IFN-λ as means to enhance the potency of STAT signaling, gene induction, and antiviral and antiproliferative activities. More importantly, an in vivo study of hepatitis B virus infected human-liver chimeric mice shows enhanced antiviral activity by our high-affinity IFN-λ without increased toxicity relative to the wild-type IFN-λ or untreated control mice. We provide evidence that IFN-λ antiviral activities can be improved through protein engineering, and suggest an avenue by which these promising molecules may be pursued for clinical use.