BACKGROUND & AIMS Hepatitis C virus (HCV) is a major cause of chronic liver disease, cirrhosis, and hepatocellular carcinoma worldwide. The majority of patients treated with interferon alpha do not have a sustained response with clearance of the virus. The molecular mechanisms underlying interferon resistance are poorly understood. Interferon-induced activation of the Jak-STAT (signal transducer and activator of transcription) signal transduction pathway is essential for the induction of an antiviral state. Interference of viral proteins with the Jak-STAT pathway could be responsible for interferon resistance in patients with chronic HCV. METHODS: We have analyzed interferon-induced signal transduction through the Jak-STAT pathway in transgenic mice that express HCV proteins in their liver cells. STAT activation was investigated with Western blots, immunofluorescence, and electrophoretic mobility shift assays. Virus challenge experiments with lymphocytic choriomeningitis virus were used to demonstrate the functional importance of Jak-STAT inhibition. RESULTS: STAT signaling was found to be strongly inhibited in liver cells of HCV transgenic mice. The inhibition occurred in the nucleus and blocked binding of STAT transcription factors to the promoters of interferon-stimulated genes. Tyrosine phosphorylation of STAT proteins by Janus kinases at the interferon receptor was not inhibited. This lack in interferon response resulted in an enhanced susceptibility of the transgenic mice to infection with a hepatotropic strain of lymphocytic choriomeningitis virus. CONCLUSIONS: Interferon-induced intracellular signaling is impaired in HCV transgenic mice. Interference of HCV proteins with interferon-induced intracellular signaling could be an important mechanism of viral persistence and treatment resistance.