The hepatitis C virus NS2/3 protease is responsible for cleavage of the viral polyprotein between nonstructural proteins NS2 and NS3. We show here that mutation of three highly conserved residues in NS2 (His(952), Glu(972), and Cys(993)) abrogates NS2/3 protease activity and that introduction of any of these mutations into subgenomic NS2-5B replicons results in complete inactivation of NS2/3 processing and RNA replication in both stable and transient replication assays. The effect of uncleaved NS2 on the various activities of NS3 was therefore explored. Unprocessed NS2 had no significant effect on the in vitro ATPase and helicase activities of NS3, whereas immunoprecipitation experiments demonstrated a decreased affinity of NS4A for uncleaved NS2/3 as compared with NS3. This subsequently resulted in reduced kinetics in an in vitro NS3 protease assay with the unprocessed NS2/3 protein. Interestingly, NS3 was still capable of efficient processing of the polyprotein expressed from a subgenomic replicon in Huh-7 cells in the presence of uncleaved NS2. Notably, we show that fusion with NS2 leads to the rapid degradation of NS3, whose activity is essential for RNA replication. Finally, we demonstrate that uncleaved NS2/3 degradation can be prevented by the addition of a proteasome inhibitor. We therefore propose that NS2/3 processing is a critical step in the viral life cycle and is required to permit the accumulation of sufficient NS3 for RNA replication to occur. The regulation of NS2/3 cleavage could constitute a novel mechanism of switching between viral RNA replication and other processes of the hepatitis C virus life cycle.