Hepatitis C virus (HCV) gene expression disrupts normal endoplasmic reticulum (ER) functions and induces ER stress. ER stress results from the accumulation of unfolded or misfolded proteins in the ER; cells can alleviate this stress by degrading or refolding these proteins. The IRE1-XBP1 pathway directs both protein refolding and degradation in response to ER stress. Like IRE1-XBP1, other branches of the ER stress response mediate protein refolding. However, IRE1-XBP1 can also specifically activate protein degradation. We show here that XBP1 expression is elevated in cells carrying HCV subgenomic replicons, but XBP1 trans-activating activity is repressed. This prevents the IRE1-XBP1 transcriptional induction of EDEM (ER degradation-enhancing alpha-mannosidase-like protein). The mRNA expression of EDEM is required for the degradation of misfolded proteins. Consequently, misfolded proteins are stable in cells expressing HCV replicons. HCV may suppress the IRE1-XBP1 pathway to stimulate the synthesis of its viral proteins. IRE1alpha-null MEFs, a cell line with a defective IRE1-XBP1 pathway, show elevated levels of HCV IRES-mediated translation. Therefore, HCV may suppress the IRE1-XBP1 pathway to not only promote HCV expression but also to contribute to the persistence of the virus in infected hepatocytes.