The antiviral role of RNA interference (RNAi) in humans remains to be better understood. In RNAi, Ago2 proteins and microRNAs (miRNAs) or small interfering RNAs (siRNAs) form endonucleolytically active complexes which down-regulate expression of target mRNAs. P-bodies, cytoplasmic centers of mRNA decay, are involved in these pathways. Evidence exists that hepatitis C virus (HCV) utilizes host cellular RNAi machinery, including miRNA-122, Ago1-4, and Dicer proteins for replication and viral genome translation in Huh7 cells by, so far, nebulous mechanisms. Conversely, synthetic siRNAs have been used to suppress HCV replication. Here, using a combination of biochemical, transfection, confocal imaging, and digital image analysis approaches, we reveal that replication of HCV RNA depends on recruitment of Ago2 and miRNA-122 to lipid droplets, while suppression of HCV RNA by siRNA and Ago2 involves interaction with P-bodies. Such partitioning of Ago2 proteins into different complexes and separate subcellular domains likely results in modulation of their activity by different reaction partners. We propose a model in which partitioning of host RNAi and viral factors into physically and functionally distinct subcellular compartments emerges as a mechanism regulating the dual interaction of cellular RNAi with HCV RNA.