The 5' nontranslated RNA (5'NTR) of a genotype 1b hepatitis C virus (HCV-N) directs cap-independent translation of the HCV-N polyprotein with about twofold less efficiency than the 5'NTR of a genotype 1a virus under physiologic conditions (Hutchinson strain, or HCV-H) (M. Honda et al., Virology 222:31-42, 1996). Here, we show by mutational analysis that substitution of the AG dinucleotide sequence at nucleotides (nt) 34 and 35 of HCV-N with GA (present in HCV-H) restores the translational activity to that of the HCV-H 5'NTR both in vitro and in vivo. These nucleotides are located upstream of the minimal essential internal ribosome entry site (IRES), as a 6-nt deletion spanning nt 32 to 37 also increased the translational activity of the HCV-N 5'NTR to that of HCV-H. Thus, the upstream AG dinucleotide sequence has an inhibitory effect on IRES-directed translation. Surprisingly, however, this inhibitory effect was observed only when the translated, downstream RNA sequence contained nt 408 to 929 of HCV (capsid-coding RNA). Further analysis of RNA transcripts containing frameshift mutations demonstrated that the nucleotide sequence of the transcript, and not the amino acid sequence of the expressed capsid protein, determines this difference in translation efficiency. The difference between the translational activities of the HCV-N and HCV-H transcripts was increased when translation was carried out in reticulocyte lysates containing high K+ concentrations, with a sevenfold difference evident at 130 to 150 mM K+. These results suggest that there is an RNA-RNA interaction involving 5'NTR and capsid-coding sequences flanking the IRES and that this is responsible for the reduced IRES activity of the genotype 1b virus, HCV-N.