The precise mechanisms responsible for the failure of intrahepatic hepatitis C virus (HCV)‐specific CD8⁺ T cells to control the virus during persistent infection have not been fully defined. We therefore studied the CD8⁺ T‐cell response in 27 HLA‐A2–positive patients using four previously well‐defined HLA‐A2–restricted HCV epitopes. The corresponding HCV sequences were determined in several patients and compared with the intrahepatic HCV‐specific CD8⁺ T‐cell response. The results of the study indicate: (1) intrahepatic HCV‐specific CD8⁺ T cells are present in the majority of patients with chronic HCV infection and overlap significantly with the response present in the peripheral blood. (2) A large fraction of intrahepatic HCV‐specific CD8⁺ T cells are impaired in their ability to secrete interferon γ (IFN‐γ). This dysfunction is specific for HCV‐specific CD8⁺ T cells, since intrahepatic Flu‐specific CD8⁺ T cells readily secrete this cytokine. (3) T‐cell selection of epitope variants may have occurred in some patients. However, it is not an inevitable consequence of a functional virus‐specific CD8⁺ T‐cell response, since several patients with IFN‐γ–producing CD8⁺ T‐cell responses harbored HCV sequences identical or cross‐reactive with the prototype sequence. (4) The failure of intrahepatic virus–specific CD8⁺ T cells to sufficiently control the virus occurs despite the presence of virus‐specific CD4⁺ T cells at the site of disease. In conclusion, different mechanisms contribute to the failure of intrahepatic CD8⁺ T cells to eliminate HCV infection, despite their persistence and accumulation in the liver. (HEPATOLOGY 2005;42:828–837.)