Hepatitis C virus (HCV) infection is treated with interferon (IFN)-based therapy. The mechanisms by which IFN suppresses HCV replication are not known, and only limited efficacy is achieved with therapy because the virus directs mechanisms to resist the host IFN response. In the present study we characterized the effects of IFN action upon the replication of two distinct quasispecies of an HCV replicon whose encoded NS5A protein exhibited differential abilities to bind and inhibit protein kinase R (PKR). Metabolic labeling experiments revealed that IFN had little overall effect upon HCV protein stability or polyprotein processing but specifically blocked translation of the HCV RNA, such that the replication of both viral quasispecies was suppressed by IFN treatment of the Huh7 host cells. However, within cells expressing an NS5A variant that inhibited PKR, we observed a reduced level of eukaryotic initiation factor 2 alpha subunit (eIF2alpha) phosphorylation and a concomitant increase in HCV protein synthetic rates, enhancement of viral RNA replication, and a partial rescue of viral internal ribosome entry site (IRES) function from IFN suppression. Assessment of the ribosome distribution of the HCV replicon RNA demonstrated that the NS5A-mediated block in eIF2alpha phosphorylation resulted in enhanced recruitment of the HCV RNA into polyribosome complexes in vivo but only partially rescued the RNA from polyribosome dissociation induced by IFN treatment. Examination of cellular proteins associated with HCV-translation complexes in IFN-treated cells identified the P56 protein as an eIF3-associated factor that fractionated with the initiator ribosome-HCV RNA complex. Importantly, we found that P56 could independently suppress HCV IRES function both in vitro and in vivo, but a mutant P56 that was unable to bind eIF3 had no suppressive action. We conclude that IFN blocks HCV replication through translational control programs involving PKR and P56 to, respectively, target eIF2- and eIF3-dependent steps in the viral RNA translation initiation process.