The hepatitis C virus (HCV) p7 protein is critical for virus production and an attractive antiviral target. p7 is an ion channel when reconstituted in artificial lipid bilayers, but channel function has not been demonstrated in vivo and it is unknown whether p7 channel activity plays a critical role in virus production. To evaluate the contribution of p7 to organelle pH regulation and virus production, we incorporated a fluorescent pH sensor within native, intracellular vesicles in the presence or absence of p7 expression. p7 increased proton (H(+)) conductance in vesicles and was able to rapidly equilibrate H(+) gradients. This conductance was blocked by the viroporin inhibitors amantadine, rimantadine and hexamethylene amiloride. Fluorescence microscopy using pH indicators in live cells showed that both HCV infection and expression of p7 from replicon RNAs reduced the number of highly acidic (pH<5) vesicles and increased lysosomal pH from 4.5 to 6.0. These effects were not present in uninfected cells, sub-genomic replicon cells not expressing p7, or cells electroporated with viral RNA containing a channel-inactive p7 point mutation. The acidification inhibitor, bafilomycin A1, partially restored virus production to cells electroporated with viral RNA containing the channel inactive mutation, yet did not in cells containing p7-deleted RNA. Expression of influenza M2 protein also complemented the p7 mutant, confirming a requirement for H(+) channel activity in virus production. Accordingly, exposure to acid pH rendered intracellular HCV particles non-infectious, whereas the infectivity of extracellular virions was acid stable and unaffected by incubation at low pH, further demonstrating a key requirement for p7-induced loss of acidification. We conclude that p7 functions as a H(+) permeation pathway, acting to prevent acidification in otherwise acidic intracellular compartments. This loss of acidification is required for productive HCV infection, possibly through protecting nascent virus particles during an as yet uncharacterized maturation process.