The type III interferon (IFN-λ) family includes 4 IFN-λ subtypes in man. In the mouse, only the genes coding for IFN-λ2 and-λ3 are present. Unlike mouse and human type I IFNs (IFN-α/β), which exhibit strong species specificity, type III IFNs were reported to act in a cross-specific manner. We reexamined the cross-specificity and observed that mouse and human IFN-λ exhibit some species specificity, although much less than type I IFNs. Mouse IFN-λ3 displayed clear species specificity, being 25-fold less active in human cells than the closely related mouse IFN-λ2. This specificity likely depends on amino acids in α helices A and F that diverged from other IFN-λ sequences. Human IFN-λ4, in contrast, retained high activity in mouse cells. We next developed a firefly luciferase-based reporter cell line, named Fawa-λ-luc, to detect IFN-λ in biological fluids with high specificity and sensitivity. Fawa-λ-luc cells, derived from mouse epithelial cells that are responsive to IFN-λ, were made nonresponsive to type I IFNs by inactivation of the Ifnar2 gene and strongly responsive to IFN-λ by overexpression of the mouse IFNLR1. This bioassay was as sensitive as a commercially available enzyme-linked immunosorbent assay in detecting mouse IFN-λ in cell culture supernatant, as well as in serum and bronchoalveolar lavage samples of virus-infected mice. The assay also enabled the sensitive detection of human IFN-λ activity, including that of the divergent IFN-λ4 with a bias, however, due to variable activity of IFN-λ subtypes.