Among human RNA viruses, hepatitis C virus (HCV) is unusual in that it causes persistent infection in the majority of infected people. To establish persistence, HCV evades host innate and adaptive immune responses by multiple mechanisms. Recent studies identified virus genome-derived small RNAs (vsRNAs) in HCV-infected cells; however, their biological significance during human HCV infection is unknown. One such vsRNA arising from the hepatitis C virus (HCV) E2 coding region impairs T cell receptor (TCR) signaling by reducing expression of a Src-kinase regulatory phosphatase (PTPRE) in vitro. Since TCR signaling is a critical first step in T cell activation, differentiation, and effector function, its inhibition may contribute towards HCV persistence in vivo. The effect of HCV infection on PTPRE expression in vivo has not been examined. Here, we found that PTPRE levels were significantly reduced in liver tissue and peripheral blood mononuclear cells (PBMCs) obtained from HCV-infected humans compared to uninfected controls. Loss of PTPRE expression impaired antigen-specific TCR signaling, and curative HCV therapy restored PTPRE expression in PBMCs; restoring antigen-specific TCR signaling defects. The extent of PTPRE expression correlated with the amount of sequence complementarity between the HCV E2 vsRNA and the PTPRE 3' UTR target sites. Transfection of a hepatocyte cell line with full-length HCV RNA or with synthetic HCV vsRNA duplexes inhibited PTPRE expression, recapitulating the in vivo observation. Together, these data demonstrate that HCV infection reduces PTPRE expression in the liver and PBMCs of infected humans, and suggest that the HCV E2 vsRNA is a novel viral factor that may contribute towards viral persistence.