The NS3 protein of hepatitis C virus (HCV) possesses protease activity responsible for the proteolytic cleavage of the viral polyprotein at the junctions of nonstructural proteins downstream of NS3. The NS3 protein was also found to be internally cleaved. In this study, we demonstrated that internal cleavages occurred on the NS3 protein of genotype 1b in the presence of NS4A, both in culture cells and with a mouse model system. No internal cleavage products were detected with the NS3 and NS4A proteins of genotype 2a. Three potential cleavage sites were detected in the NS3 protein (genotype 1b), with IPT(402)|S being the major one. The internal cleavage requires the polyprotein processing activity of NS3 protease, but when supplemented in trans, the internal cleavage efficiency is reduced. In addition, several mutations in NS4A disrupted the internal cleavage of NS3 but did not affect polyprotein processing, indicating that NS4A contributes differently to these two proteolytic activities. Furthermore, Ile-25, Val-26, and Ile-29 of the NS4A protein, important for the NS4A-dependent internal cleavages, were also shown to be critical for the transforming activity of NS3, but mutations at these critical residues resulted only in a slight increase of HCV replicating efficiency. The internal cleavage-associated enhancement of the transforming activity of NS3 was reduced when a T402A substitution at the major internal cleavage site was introduced. The multiple roles of NS4A in viral multiplication and pathogenesis make NS4A an ideal molecular target for HCV therapy.