Hepatitis C virus (HCV) infection develops into chronicity in 80% of all patients, characterized by persistent low-level replication. To understand how the virus establishes its tightly controlled intracellular RNA replication cycle, we developed the first detailed mathematical model of the initial dynamic phase of the intracellular HCV RNA replication. We therefore quantitatively measured viral RNA and protein translation upon synchronous delivery of viral genomes to host cells, and thoroughly validated the model using additional, independent experiments. Model analysis was used to predict the efficacy of different classes of inhibitors and identified sensitive substeps of replication that could be targeted by current and future therapeutics. A protective replication compartment proved to be essential for sustained RNA replication, balancing translation versus replication and thus effectively limiting RNA amplification. The model predicts that host factors involved in the formation of this compartment determine cellular permissiveness to HCV replication. In gene expression profiling, we identified several key processes potentially determining cellular HCV replication efficiency.