Kaposi's sarcoma-associated herpesvirus (KSHV) encodes four viral interferon regulatory factors (vIRF-1-4). We investigated the mechanism and consequences of vIRF-2-mediated inhibition of interferon-response element signalling following type I interferon (IFN) induction. Western blot and electrophoretic mobility-shift assays identified the interferon-stimulated gene factor-3 (ISGF-3) components STAT1 and IRF-9 as the proximal targets of vIRF-2 activity. The biological significance of vIRF-2 inhibition of ISGF-3 was demonstrated by vIRF-2-mediated rescue of the replication of the IFN-sensitive virus encephalomyocarditis virus. This study provides both a mechanism and evidence for KSHV vIRF-2-mediated suppression of the consequences of type 1 IFN-induced signaling.