Over the past two decades, the incidence of HCC has more than tripled in the United States, and this alarming trend is due primarily, if not exclusively, to HCV infection. However, the role of HCV in hepatocarcinogenesis is still unknown. Whether HCV elicits liver cancer indirectly through chronic inflammation and fibrosis, or directly through the expression of viral proteins in a manner analogous to other human oncogenic viruses, remains to be established. In particular, there is limited information on the level of HCV replication within malignant hepatocytes and the molecular interactions between virus and tumor. We found a significant decrease in HCV RNA in the tumor compared to surrounding non-tumorous tissues, whereas no differences were observed in multiple areas of control non-HCC cirrhotic livers. Diminished HCV replication was not associated with changes in miR-122 expression. Tracking of individual variants demonstrated changes in viral population between tumorous and non-tumorous areas, the extent of which correlated with the decline in HCV RNA, suggesting HCV compartmentalization within the tumor. In contrast, compartmentalization was not observed between non-tumorous areas and serum, nor in controls between different areas of the cirrhotic liver or between liver and serum. Our findings indicate that HCV replication within the tumor is restricted, with viral compartmentalization suggesting segregation of specific viral variants in malignant hepatocytes. Our results provide new insights for understanding the role of HCV in HCC and may give new impetus to investigate whether malignant hepatocytes express or more likely have lost expression of factors that restrict viral replication.