To examine the cell fusion activity of hepatitis C virus (HCV) envelope proteins (E1 and E2), we have established a sensitive cell fusion assay based on the activation of a reporter gene as described previously (O. Nussbaum, C. C. Broder, and E. A. Berger, J. Virol. 68:5411-5422, 1994). The chimeric HCV E1 and E2 proteins, each consisting of the ectodomain of the E1 and E2 envelope protein and the transmembrane and cytoplasmic domains of the vesicular stomatitis virus G glycoprotein, were expressed on the cell surface. Cells expressing the chimeric envelope proteins and T7 RNA polymerase were cocultured with the various target cell lines transfected with a reporter plasmid encoding the luciferase gene under the control of the T7 promoter. After cocultivation, the cell fusion activity was determined by the expression of luciferase in the cocultured cells. The induction of cell fusion requires both the chimeric E1 and E2 proteins and occurs in a low-pH-dependent manner. Although it has been shown that HCV E2 protein binds human CD81 (P. Pileri, Y. Uematsu, S. Campagnoli, G. Galli, F. Falugi, R. Petracca, A. J. Weiner, M. Houghton, D. Rosa, G. Grandi, and S. Abrignani, Science 282:938-941, 1998), the expression of human CD81 alone is not sufficient to confer susceptibility to cell fusion in the mouse cell line. Treatment of the target cells with pronase, heparinase, or heparitinase reduced the cell fusion activity induced by the chimeric envelope proteins. These results suggest (i) that both HCV E1 and E2 proteins are responsible for fusion with the endosomal membrane after endocytosis and (ii) that certain protein molecules other than human CD81 and some glycosaminoglycans on the cell surface are also involved in the cell fusion induced by HCV.