Hepatitis C virus (HCV) nonstructural 3 (NS3) serine protease disrupts important cellular antiviral signaling pathways and plays a pivotal role in the proteolytic maturation of the HCV polyprotein precursor. This recent discovery has fostered the search for NS3 protease inhibitors. However, the enzyme's unusual induced fit behavior and peculiar molecular architecture have imposed considerable obstacles to the development of small molecule inhibitors. In this article, we demonstrate that such unique induced fit behavior and the chymotrypsin-like catalytic domain can provide the structural plasticity necessary to generate protein-based inhibitors of the NS3 protease. We took advantage of the macromolecular scaffold of a Drosophila serpin, SP6, which intrinsically supports chymotrypsin-like enzyme inhibition, to design a novel class of potent and selective inhibitors. We show that altering the SP6 reactive site loop (RSL) resulted in the development of the first effective (K(i) of 34 nm) and selective serpin, SP6(EVC/S), directed at the NS3 protease. SP6(EVC/S) operates as a suicide substrate inhibitor, and its partitioning between the complex-forming and proteolytic pathways for the NS3 protease is HCV NS4A cofactor-dependent and -specific. Once bound to the protease active site, SP6(EVC/S) partitions with equal probability to undergo proteolysis by NS3 at the C-terminal site of the engineered RSL, (P(6))Glu-Ile-(P(4))Val-Met-Thr-(P(1))Cys- downward arrow -(P(1)')Ser, or to form a covalent acyl-enzyme complex characteristic of cognate protease-serpin pairs. Our results also reveal a novel cofactor-induced serpin mechanism of enzyme inhibition that could be explored for developing effective and selective inhibitors of other important induced fit viral proteases of the Flaviviridae family such as the West Nile virus NS3 endoprotease.