The molecular basis underlying hepatitis C virus (HCV) core protein maturation and morphogenesis remains elusive. We characterized the concerted events associated with core protein multimerization and interaction with membranes. Analyses of core proteins expressed from a subgenomic system showed that the signal sequence located between the core and envelope glycoprotein E1 is critical for core association with endoplasmic reticula (ER)/late endosomes and the core's envelopment by membranes, which was judged by the core's acquisition of resistance to proteinase K digestion. Despite exerting an inhibitory effect on the core's association with membranes, (Z-LL)(2)-ketone, a specific inhibitor of signal peptide peptidase (SPP), did not affect core multimeric complex formation, suggesting that oligomeric core complex formation proceeds prior to or upon core attachment to membranes. Protease-resistant core complexes that contained both innate and processed proteins were detected in the presence of (Z-LL)(2)-ketone, implying that core envelopment occurs after intramembrane cleavage. Mutations of the core that prevent signal peptide cleavage or coexpression with an SPP loss-of-function D219A mutant decreased the core's envelopment, demonstrating that SPP-mediated cleavage is required for core envelopment. Analyses of core mutants with a deletion in domain I revealed that this domain contains sequences crucial for core envelopment. The core proteins expressed by infectious JFH1 and Jc1 RNAs in Huh7 cells also assembled into a multimeric complex, associated with ER/late-endosomal membranes, and were enveloped by membranes. Treatment with (Z-LL)(2)-ketone or coexpression with D219A mutant SPP interfered with both core envelopment and infectious HCV production, indicating a critical role of core envelopment in HCV morphogenesis. The results provide mechanistic insights into the sequential and coordinated processes during the association of the HCV core protein with membranes in the early phase of virus maturation and morphogenesis.