A bioassay that measured the interleukin (IL)-12-induced production of interferon (IFN)-gamma from mouse splenocytes was used to identify a soluble factor in the supernatants of vaccinia virus (VV)-infected cells that inhibited the production of IFN-gamma. This soluble factor was expressed by 14 out of 16 VV strains including the Western Reserve (WR) strain, but strains Copenhagen and Tashkent and a mutant of strain WR called 6/2 lacked this activity. The gene encoding this activity was identified as C12L by transferring DNA present in VV WR but missing in VV WR 6/2 into VV Copenhagen and testing for expression of the soluble factor. The C12L protein shows amino acid similarity to IL-18 binding proteins that are encoded by poxviruses, mice and humans, and C12L protein produced from VV or baculovirus inhibited the biological activity of mouse IL-18 in vitro. Thus the inhibition of IL-12-induced IFN-gamma production was due to indirect effects of C12L on IL-18, illustrating the synergistic action of these pro-inflammatory cytokines. To study the role of the C12L protein in the virus life-cycle, we constructed a deletion mutant lacking the C12L gene and a revertant virus in which the gene was reinserted into the deletion mutant. In vitro the replication and plaque size of these viruses were indistinguishable. However, infection of BALB/c mice by the intranasal route showed that the deletion mutant was attenuated and induced lower weight loss and signs of illness compared to controls.