ABSTRACT The hepatitis C virus envelope protein, E2, is an endoplasmic reticulum (ER)-bound protein that contains a region of sequence homology with the double-stranded RNA-activated protein kinase PKR and its substrate, the eukaryotic translation initiation factor 2 (eIF2). We previously reported that E2 modulates global translation through inhibition of the interferon-induced antiviral protein PKR through its PKR-eIF2α phosphorylation site homology domain (PePHD). Here we show that the PKR-like ER-resident kinase (PERK) binds to and is also inhibited by E2. At low expression levels, E2 induced ER stress, but at high expression levels, and in vitro, E2 inhibited PERK kinase activity. Mammalian cells that stably express E2 were refractory to the translation-inhibitory effects of ER stress inducers, and E2 relieved general translation inhibition induced by PERK. The PePHD of E2 was required for the rescue of translation that was inhibited by activated PERK, similar to our previous findings with PKR. Here we report the inhibition of a second eIF2α kinase by E2, and these results are consistent with a pseudosubstrate mechanism of inhibition of eIF2α kinases. These findings may also explain how the virus promotes persistent infection by overcoming the cellular ER stress response.