Adaptive T cell responses are critical for controlling HCV infection. While there is clinical evidence of a relevant role for regulatory T cells in chronic HCV-infected patients, based on their increased number and function; mechanisms underlying such a phenomena are still poorly understood. Accumulating evidence suggests that proteins from Hepatitis C virus can suppress host immune responses. We and others have shown that HCV is present in CD4+ lymphocytes from chronically infected patients and that HCV-core protein induces a state of unresponsiveness in the CD4+ tumor cell line Jurkat. Here we show that CD4+ primary T cells lentivirally transduced with HCV-core, not only acquire an anergic phenotype but also inhibit IL-2 production and proliferation of bystander CD4+ or CD8+ T cells in response to anti-CD3 plus anti-CD28 stimulation. Core-transduced CD4+ T cells show a phenotype characterized by an increased basal secretion of the regulatory cytokine IL-10, a decreased IFN-γ production upon stimulation, as well as expression of regulatory T cell markers, CTLA-4, and Foxp3. A significant induction of CD4+CD25+CD127(low)PD-1(high)TIM-3(high) regulatory T cells with an exhausted phenotype was also observed. Moreover, CCR7 expression decreased in HCV-core expressing CD4+ T cells explaining their sequestration in inflamed tissues such as the infected liver. This work provides a new perspective on de novo generation of regulatory CD4+ T cells in the periphery, induced by the expression of a single viral protein.