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Severe liver disease caused by chronic hepatitis C virus is the major indication for liver transplantation. Despite recent advances in antiviral therapy, drug toxicity and unwanted side effects render effective treatment in liver-transplanted patients a challenging task. Virus-specific therapeutic antibodies are generally safe and well-tolerated, but their potential in preventing and treating hepatitis C virus (HCV) infection has not yet been realized due to a variety of issues, not least high production costs and virus variability. Heavy-chain antibodies or nanobodies, produced by camelids, represent an exciting antiviral approach; they can target novel highly conserved epitopes that are inaccessible to normal antibodies, and they are also easy to manipulate and produce. We isolated four distinct nanobodies from a phage-display library generated from an alpaca immunized with HCV E2 glycoprotein. One of them, nanobody D03, recognized a novel epitope overlapping with the epitopes of several broadly neutralizing human monoclonal antibodies. Its crystal structure revealed a long complementarity determining region (CD3) folding over part of the framework that, in conventional antibodies, forms the interface between heavy and light chain. D03 neutralized a panel of retroviral particles pseudotyped with HCV glycoproteins from six genotypes and authentic cell culture–derived particles by interfering with the E2-CD81 interaction. In contrast to some of the most broadly neutralizing human anti-E2 monoclonal antibodies, D03 efficiently inhibited HCV cell-to-cell transmission. Conclusion: This is the first description of a potent and broadly neutralizing HCV-specific nanobody representing a significant advance that will lead to future development of novel entry inhibitors for the treatment and prevention of HCV infection and help our understanding of HCV cell-to-cell transmission. (Hepatology 2013;53:932–939)