Hepatitis C virus core protein is the viral nucleocapsid of hepatitis C virus. Interaction of core with cellular membranes like endoplasmic reticulum (ER) and lipid droplets (LD) appears to be involved in viral assembly. However, how these interactions with different cellular membranes are regulated is not well understood. In this study, we investigated how palmitoylation, a post-translational protein modification, can modulate the targeting of core to cellular membranes. We show that core is palmitoylated at cysteine 172, which is adjacent to the transmembrane domain at the C-terminal end of core. Site-specific mutagenesis of residue Cys(172) showed that palmitoylation is not involved in the maturation process carried out by the signal peptide peptidase or in the targeting of core to LD. However, palmitoylation was shown to be important for core association with smooth ER membranes and ER closely surrounding LDs. Finally, we demonstrate that mutation of residue Cys(172) in the J6/JFH1 virus genome clearly impairs virion production.