While many clinical hepatitis C virus (HCV) infections are resistant to alpha interferon (IFN-alpha) therapy, subgenomic in vitro self-replicating HCV RNAs (HCV replicons) are characterized by marked IFN-alpha sensitivity. IFN-alpha treatment of replicon-containing cells results in a rapid loss of viral RNA via translation inhibition through double-stranded RNA-activated protein kinase (PKR) and also through a new pathway involving RNA editing by an adenosine deaminase that acts on double-stranded RNA (ADAR1). More than 200 genes are induced by IFN-alpha, and yet only a few are attributed with an antiviral role. We show that inhibition of both PKR and ADAR1 by the addition of adenovirus-associated RNA stimulates replicon expression and reduces the amount of inosine recovered from RNA in replicon cells. Small inhibitory RNA, specific for ADAR1, stimulated the replicon 40-fold, indicating that ADAR1 has a role in limiting replication of the viral RNA. This is the first report of ADAR's involvement in a potent antiviral pathway and its action to specifically eliminate HCV RNA through adenosine to inosine editing. These results may explain successful HCV replicon clearance by IFN-alpha in vitro and may provide a promising new therapeutic strategy for HCV as well as other viral infections.