Multiple Kaposi's sarcoma-associated herpesvirus (KSHV)-encoded proteins with potential roles in KSHV-associated neoplasms have been identified. KSHV encodes 4 genes with homology to transcription factors of the interferon (IFN) regulatory factor (IRF) family. Viral IRF3 (vIRF3) is expressed in latently KSHV-infected primary effusion lymphoma (PEL) cells and was recently shown to be essential for the survival of PEL cells. The focus of this study was to determine the mechanism(s) of vIRF3 oncogenic activity contributing to KSHV-associated lymphoma. We report that vIRF3 interacts with the amino-terminal DNA binding domain of human IRF5, leading to a complex manipulation of IRF5 function. vIRF3 associated with both exogenous and endogenous IRF5, thereby inhibiting IRF5-mediated IFN promoter activation and the synthesis of biologically active type I IFNs by blocking its binding to endogenous IFNA promoters. The function of this interaction was not limited to the IFN system as IRF5-mediated cell growth regulation was significantly altered by overexpression of vIRF3 in B cells. vIRF3 prevented IRF5-mediated growth inhibition and G2/M cell cycle arrest. Important, IRF5 was upregulated by the protein kinase C agonist 12-O-tetradecanoyl-phorbol-13-acetate in BCBL1 PEL cells and interaction with vIRF3 was observed at the endogenous p21 promoter in response to 12-O-tetradecanoyl-phorbol-13-acetate, suggesting that these 2 proteins cooperate in the regulation of lytic cycle-induced G1 arrest, which is an important early step for the reactivation of KSHV. In conclusion, cellular IRF5 and vIRF3 interact, leading to the functional modulation of IRF5-mediated type I IFN expression and cell cycle regulation. These findings support an important role for vIRF3 in immune evasion and cell proliferation that likely contribute to the survival of PEL cells.