Hepatitis C virus (HCV) is a single-stranded RNA virus encoding a single polyprotein whose translation is driven by an internal ribosome entry site (IRES). HCV infection strongly induces antiviral interferon-stimulated gene (ISG) expression in the liver, yet it persists, suggesting that HCV can block ISG effector function. We now show that HCV infection triggers phosphorylation and activation of the RNA-dependent protein kinase PKR, which inhibits eukaryotic translation initiation factor eIF2 alpha and attenuates ISG protein expression despite normal ISG mRNA induction. ISG protein induction is restored and the antiviral effects of interferon are enhanced when PKR expression is suppressed in interferon-treated infected cells. Whereas host protein translation, including antiviral ISGs, is suppressed by activated PKR, HCV IRES-dependent translation is not. These results suggest that the ability of HCV to activate PKR may, paradoxically, be advantageous for the virus during an IFN response by preferentially suppressing the translation of ISGs.