The ISG15/USP18 pathway modulates cellular functions and is important for the host innate immune response to chronic viral infections such as Hepatitis C Virus (HCV). Interferon stimulated gene 15 (ISG15) was the first ubiquitin-like protein modifier identified. As in ubiquitination, ISG15 conjugates to target proteins (ISGylation) through the sequential enzymatic action of activating E1, conjugating E2, and ligating E3 enzymes. ISGylation modulates signal transduction pathways and host anti-viral response. The ISGylation process is reversible through the action of an ISG15 protease, USP18. Ubiquitin-like specific protease 18 (USP18) has functions that are both ISG15-dependent and ISG15-independent; the importance of the ISG15/USP18 pathway to chronic HCV infection is illustrated by the consistent finding of increased levels of ISG15 and USP18 in the liver tissue of patients who do not respond to interferon-based treatments. Mechanistically, HCV seems to exploit the ISG15/USP18 pathway to promote viral replication and evade innate anti-viral immune responses.