TNF-α is a proinflammatory cytokine, dramatically elevated during pathogenic infection and often responsible for inflammation-induced disease pathology. SOCS proteins are inhibitors of cytokine signaling and regulators of inflammation. In this study, we found that both SOCS1 and SOCS3 were transiently induced by TNF-α and negatively regulate its NF-κB-mediated signal transduction. We discovered that PBMCs from HCV-infected patients have elevated endogenous SOCS3 expression but less TNF-α-mediated IκB degradation and proinflammatory cytokine production than healthy controls. HCV protein expression in Huh7 hepatocytes also induced SOCS3 and directly inhibited TNF-α-mediated IL-8 production. Furthermore, we found that SOCS3 associates with TRAF2 and inhibits TRAF2-mediated NF-κB promoter activity, suggesting a mechanism by which SOCS3 inhibits TNF-α-mediated signaling. These results demonstrate a role for SOCS3 in regulating proinflammatory TNF-α signal transduction and reveal a novel immune-modulatory mechanism by which HCV suppresses inflammatory responses in primary immune cells and hepatocytes, perhaps explaining mild pathology often associated with acute HCV infection.