P-bodies (PB) are non-membranous foci involved in determining mRNA fate by affecting translation and mRNA decay. In this study, we identify the anti-viral factor SHFL as a potent disassembly factor of PB. We show that PBs remain sparse in the presence of SHFL even in the context of oxidative stress, a major trigger for PB induction. Mutational approaches revealed that SHFL RNA binding activity is not required for its PB disassembly function. However, we have identified a new region of SHFL which bridges two distant domains as responsible for PB disassembly. Furthermore, we show that SHFL ability to disrupt PB formation is directly linked to its anti-viral activity during KSHV infection. While WT SHFL efficiently restricts KSHV lytic cycle, PB disruption defective mutants no longer lead to reactivation defects. SHFL-mediated PB disassembly also leads to increased expression of key anti-viral cytokines, further expanding SHFL dependent anti-viral state. Taken together, our observations suggest a role of SHFL in PB disassembly, which could have important anti-viral consequences during infection.