NS3, a non-structural protein of the HCV (hepatitis C virus), contains a protease and a helicase domain and plays essential roles in the processing of the viral polyprotein, viral RNA replication and translation. LMP7 (low-molecular-mass protein 7), a component of the immunoproteasome, was identified as an NS3-binding protein from yeast two-hybrid screens, and this interaction was confirmed by in vitro binding and co-immunoprecipitation analysis. The minimal domain of interaction was defined to be between the pro-sequence region of LMP7 (amino acids 1-40) and the protease domain of NS3. To elucidate the biological importance of this interaction, we studied the effect of this interaction on NS3 protease activity and on LMP7 immunoproteasome activity. Recombinant LMP7 did not have any effect on NS3 protease activity in vitro. The peptidase activities of LMP7 immunoproteasomes, however, were markedly reduced when tested in a stable cell line containing a HCV subgenomic replicon. The down-regulation of proteasome peptidase activities could interfere with the processing of viral antigens for presentation by MHC class I molecules, and may thus protect HCV from host immune surveillance mechanisms to allow persistent infection by the virus.