In this study, human embryonic stem cell-derived hepatocytes (hESC-Heps) were investigated for their ability to support hepatitis C virus (HCV) infection and replication. hESC-Heps were capable of supporting the full viral life cycle, including the release of infectious virions. Although supportive, hESC-Hep viral infection levels were not as great as those observed in Huh7 cells. We reasoned that innate immune responses in hESC-Heps may lead to the low level of infection and replication. Upon further investigation, we identified a strong type III interferon response in hESC-Heps that was triggered by HCV. Interestingly, specific inhibition of the JAK/STAT signaling pathway led to an increase in HCV infection and replication in hESC-Heps. Of note, the interferon response was not evident in Huh7 cells. In summary, we have established a robust cell-based system that allows the in-depth study of virus-host interactions in vitro.