Background: High-sensitivity C-reactive protein (CRP) is an inflammatory marker that predicts coronary heart disease (CHD) and, in recent studies, incident heart failure (HF). Whether the association of inflammation with incident HF is explained by worse baseline left ventricular dysfunction or by underlying CHD is unknown. Methods and results: Serum CRP was measured in a cohort of 985 outpatients with established CHD from the Heart and Soul Study. During 3 years of follow-up, 15% of the participants with elevated CRP levels (N3 mg/L) were hospitalised for HF, compared with 7% of those with CRP ≤3 mg/L. In multivariate analysis, elevated CRP was associated with HF after adjustment for traditional risk factors, baseline CHD severity and interim MI (adjusted HR 2.1, 95% CI, 1.2-3.6; p = 0.009). However, elevated CRP was no longer associated with HF after further adjustment for the presence of diastolic dysfunction on echocardiography (adjusted HR 1.6, 95% CI, 0.8-3.2; p = 0.1). Conclusions: Among outpatients with stable CHD, elevated CRP levels predict hospitalisation for heart failure, independent of baseline heart failure, medication use, CHD severity, and subsequent MI events. This relationship appears to be at least partly explained by abnormal diastolic function in patients with elevated CRP levels.