The capsid of hepatitis C virus (HCV) particles is considered to be composed of the mature form (p21) of core protein. Maturation to p21 involves cleavage of the transmembrane domain of the precursor form (p23) of core protein by signal peptide peptidase (SPP), a cellular protease embedded in the endoplasmic reticulum membrane. Here we have addressed whether SPP-catalyzed maturation to p21 is a prerequisite for HCV particle morphogenesis in the endoplasmic reticulum. HCV structural proteins were expressed by using recombinant Semliki Forest virus replicon in mammalian cells or recombinant baculovirus in insect cells, because these systems have been shown to allow the visualization of HCV budding events and the isolation of HCV-like particles, respectively. Inhibition of SPP-catalyzed cleavage of core protein by either an SPP inhibitor or HCV core mutations not only did not prevent but instead tended to facilitate the observation of viral buds and the recovery of virus-like particles. Remarkably, although maturation to p21 was only partially inhibited by mutations in insect cells, p23 was the only form of core protein found in HCV-like particles. Finally, newly developed assays demonstrated that p23 capsids are more stable than p21 capsids. These results show that SPP-catalyzed cleavage of core protein is dispensable for HCV budding but decreases the stability of the viral capsid. We propose a model in which p23 is the form of HCV core protein committed to virus assembly, and cleavage by SPP occurs during and/or after virus budding to predispose the capsid to subsequent disassembly in a new cell.