Replication of hepatitis C virus (HCV) RNA occurs on intracellular membranes, and the replication complex (RC) contains viral RNA, nonstructural proteins, and cellular cofactors. We previously demonstrated that cyclophilin A (CyPA) is an essential cofactor for HCV infection and the intracellular target of cyclosporine's anti-HCV effect. Here we investigate the mechanism by which CyPA facilitates HCV replication. Cyclosporine treatment specifically blocked the incorporation of NS5B into the RC without affecting either the total protein level or the membrane association of the protein. Other nonstructural proteins or viral RNAs in the RC were not affected. NS5B from the cyclosporine-resistant replicon was resistant to this disruption of RC incorporation. We also isolated membrane fractions from both naïve and HCV-positive cells and found that CyPA is recruited into membrane fractions in HCV-replicating cells via an interaction with RC-associated NS5B, which is sensitive to cyclosporine treatment. Finally, we introduced point mutations in the prolyl-peptidyl isomerase (PPIase) motif of CyPA and demonstrated a critical role of this motif in HCV replication in cDNA rescue experiments. We propose a model in which the incorporation of the HCV polymerase into the RC depends on its interaction with a cellular chaperone protein and in which cyclosporine inhibits HCV replication by blocking this critical interaction and the PPIase activity of CyPA. Our results provide a mechanism of action for the cyclosporine-mediated inhibition of HCV and identify a critical role of CyPA's PPIase activity in the proper assembly and function of the HCV RC.