The conservation of positively charged residues in the N terminus of the hepatitis C virus (HCV) envelope glycoprotein E2 suggests an interaction of the viral envelope with cell surface glycosaminoglycans. Using recombinant envelope glycoprotein E2 and virus-like particles as ligands for cellular binding, we demonstrate that cell surface heparan sulfate proteoglycans (HSPG) play an important role in mediating HCV envelope-target cell interaction. Heparin and liver-derived highly sulfated heparan sulfate but not other soluble glycosaminoglycans inhibited cellular binding and entry of virus-like particles in a dose-dependent manner. Degradation of cell surface heparan sulfate by pretreatment with heparinases resulted in a marked reduction of viral envelope protein binding. Surface plasmon resonance analysis demonstrated a high affinity interaction (KD 5.2 x 10-9 m) of E2 with heparin, a structural homologue of highly sulfated heparan sulfate. Deletion of E2 hypervariable region-1 reduced E2-heparin interaction suggesting that positively charged residues in the N-terminal E2 region play an important role in mediating E2-HSPG binding. In conclusion, our results demonstrate for the first time that cellular binding of HCV envelope requires E2-HSPG interaction. Docking of E2 to cellular HSPG may be the initial step in the interaction between HCV and the cell surface resulting in receptor-mediated entry and initiation of infection.