Cellular immune responses play an important role in the control of hepatitis C virus (HCV), although in the majority of cases they ultimately fail. We examine the mechanisms by which virus-specific T cells may interact with a cell that is infected with HCV and how this interaction may explain the success and failure of the immune response. As an infected cell presenting foreign antigen, the hepatocyte will interact with a large number of lymphocytes, both by direct cell to cell contact and by indirect means through the secretion of cytokines and chemokines. These interactions may lead on the one hand to the death of infected hepatocytes or suppression of viral replication and on the other hand to the death of T lymphocytes or down regulation of their function. We suggest that activation of lymphocytes in lymphoid organs leads to generation of effector T cells (positive loop), while at the same time presentation of antigen in the liver either on hepatocytes or other specialised antigen presenting cells depresses these responses (negative loop). This model helps to explain both the specific phenotype and low frequencies of HCV specific CTL in chronic infection, through early elimination of cells before expansion and maturation can occur. The outcome of HCV infection is likely to result from the early balance between these two simultaneous loops.