Respiratory viruses often express mechanisms to resist host antiviral systems, but the biochemical basis for evasion of interferon effects by respiratory syncytial virus (RSV) is poorly defined. In this study, we identified RSV effects on interferon (IFN)-dependent signal transduction and gene expression in human airway epithelial cells. Initial experiments demonstrated inhibition of antiviral gene expression induced by IFN-alpha and IFN-beta, but not IFN-gamma, in epithelial cells infected with RSV. Selective viral effects on type I IFN-dependent signaling were confirmed when we observed impaired type I, but not type II, IFN-induced activation of the transcription factor Stat1 in RSV-infected cells. RSV infection of airway epithelial cells resulted in decreased Stat2 expression and function with preservation of upstream signaling events, providing a molecular mechanism for viral inhibition of the type I IFN JAK-STAT pathway. Furthermore, nonspecific pharmacologic inhibition of proteasome function in RSV-infected cells restored Stat2 levels and IFN-dependent activation of Stat1. The results indicate that RSV acts on epithelial cells in the airway to directly modulate the type I IFN JAK-STAT pathway, and this effect is likely mediated though proteasome-dependent degradation of Stat2. Decreased antiviral gene expression in RSV-infected airway epithelial cells may allow RSV replication and establishment of a productive viral infection through subversion of IFN-dependent immunity.