In hepatitis C virus (HCV) polyprotein sequence, core protein terminates with E1 envelope signal peptide. Cleavage by signal peptidase (SP) separates E1 from the complete form of core protein, anchored in the endoplasmic reticulum (ER) membrane by the signal peptide. Subsequent cleavage of the signal peptide by signal-peptide peptidase (SPP) releases the mature form of core protein, which preferentially relocates to lipid droplets. Both of these cleavages are required for the HCV infectious cycle, supporting the idea that HCV assembly begins at the surface of lipid droplets, yet SPP-catalyzed cleavage is dispensable for initiation of budding in the ER. Here we have addressed at what step(s) of the HCV infectious cycle SP-catalyzed cleavage at the core-E1 junction is required. Taking advantage of the sole system that has allowed visualization of HCV budding events in the ER lumen of mammalian cells, we showed that, unexpectedly, mutations abolishing this cleavage did not prevent but instead tended to promote the initiation of viral budding. Moreover, even though no viral particles were released from Huh-7 cells transfected with a full-length HCV genome bearing these mutations, intracellular viral particles containing core protein protected by a membrane envelope were formed. These were visualized by electron microscopy as capsid-containing particles with a diameter of about 70 nm and 40 nm before and after delipidation, respectively, comparable to intracellular wild-type particle precursors except that they were non-infectious. Thus, our results show that SP-catalyzed cleavage is dispensable for HCV budding per se, but is required for the viral particles to acquire their infectivity and secretion. These data support the idea that HCV assembly occurs in concert with budding at the ER membrane. Furthermore, capsid-containing particles did not accumulate in the absence of SP-catalyzed cleavage, suggesting the quality of newly formed viral particles is controlled before secretion.