The impaired function of CD8(+) T cells is characteristic of hepatitis C virus (HCV) persistent infection. HCV core protein has been reported to inhibit CD8(+) T cell responses. To determine the mechanism of the HCV core in suppressing Ag-specific CD8(+) T cell responses, we generated a transgenic mouse, core(+) mice, where the expression of core protein is directed to the liver using the albumin promoter. Using a recombinant adenovirus to deliver Ag, we demonstrated that core(+) mice failed to clear adenovirus-LacZ (Ad-LacZ) infection in the liver. The effector function of LacZ-specific CD8(+) T cells was particularly impaired in the livers of core(+) mice, with suppression of IFN-gamma, TNF-alpha, and granzyme B production by CD8(+) T cells. In addition, the impaired CD8(+) T cell responses in core(+) mice were accompanied by the enhanced expression of the inhibitory receptor programmed death-1 (PD-1) by LacZ-specific CD8(+) T cells and its ligand B7-H1 on liver dendritic cells following Ad-LacZ infection. Importantly, blockade of the PD-1/B7-H1 inhibitory pathway (using a B7-H1 blocking antibody) in core(+) mice enhanced effector function of CD8(+) T cells and cleared Ad-LacZ-infection as compared with that in mice treated with control Ab. This suggests that the regulation of the PD-1/B7-H1 inhibitory pathway is crucial for HCV core-mediated impaired T cell responses and viral persistence in the liver. This also suggests that manipulation of the PD-1/B7-H1 pathway may be a potential immunotherapy to enhance effector T cell responses during persistent HCV infection.