Insufficient elimination of the hepatitis C virus (HCV) during acute infection results in chronic disease in the majority of patients due to weak virus-specific immune responses. Dendritic cells (DC) play a central role in recognition of HCV and in induction of innate and adaptive immune responses. In this study, we evaluated the frequency and functions of plasmacytoid dendritic cells (PDC) and myeloid dendritic cells (MDC) in patients with chronic HCV infection. We found that both the numbers and IFNalpha production capacity of blood PDC were significantly reduced in patients with chronic HCV infection compared to normal controls. While the frequency of MDC was not affected in chronic HCV, the allostimulatory capacity of monocyte-derived MDC was significantly decreased compared to normals. Lipopolysaccharide (LPS)-induced maturation improved the allostimulatory capacity of HCV infected patients' MDC that still remained significantly lower compared to normal controls. Our experiments revealed that MDC defects can be induced by HCV core and NS3 proteins suggesting virus-induced mechanisms for the DC defects in HCV infection. Finally, using toll-like receptor 2 (TLR2) and TLR4 deficient or mutant mice, we demonstrated that TLR2 but not TLR4 was critical in recognition of HCV core and NS3 proteins by innate immune cells. Further, TLR2 recognition of HCV core and NS3 was not augmented by co-expression of the TLR co-receptor, CD14. These data demonstrate that both PDC and MDC functions are impaired in patients with chronic HCV infection and DC defects are likely related to interaction of HCV viral products with innate immune cells.