Hepatitis C virus (HCV) p7 is a membrane-associated ion channel protein crucial for virus production. To analyze how p7 contributes to this process, we dissected HCV morphogenesis into sub-steps including recruitment of HCV core to lipid droplets (LD), virus capsid assembly, unloading of core protein from LDs and subsequent membrane envelopment of capsids. Interestingly, we observed accumulation of slowly sedimenting capsid-like structures lacking the viral envelope in cells transfected with HCV p7 mutant genomes which possess a defect in virion production. Concomitantly, core protein was enriched at the surface of LDs. This indicates a defect in core/capsid unloading from LDs and subsequent membrane envelopment rather than defective trafficking of core to this cellular organelle. Protease and ribonuclease digestion protection assays, rate zonal centrifugation and native, two dimensional gel electrophoresis revealed increased amounts of high-order, non-enveloped core protein complexes unable to protect viral RNA in cells transfected with p7 mutant genomes. These results suggest accumulation of capsid assembly intermediates that had not yet completely incorporated viral RNA in the absence of functional p7. Thus, functional p7 is necessary for the final steps of capsid assembly as well as for capsid envelopment. These results support a model where capsid assembly is linked with membrane envelopment of nascent RNA-containing core protein multimers, a process coordinated by p7. In summary, we provide novel insights into the sequence of HCV assembly events and essential functions of p7.