The cellular protein Daxx was identified as an interactor with avian sarcoma virus (ASV) integrase (IN) in a yeast two-hybrid screen. After infection, Daxx-IN interactions were detected by coimmunoprecipitation. An association between Daxx and viral DNA, likely mediated by IN, was also detected by chromatin immunoprecipitation. Daxx was not required for early events in ASV replication, including integration, as Daxx-null cells were transduced as efficiently as Daxx-expressing cells. However, viral reporter gene expression from ASV-based vectors was substantially higher in the Daxx-null cells than in Daxx-complemented cells. Consistent with this observation, histone deacetylases (HDACs) were found to associate with viral DNA in Daxx-complemented cells but not in Daxx-null cells. Furthermore, Daxx protein was induced in an interferon-like manner upon ASV infection. We conclude that Daxx interacts with an IN-viral DNA complex early after infection and may mediate the repression of viral gene expression via the recruitment of HDACs. Our findings provide a novel example of cellular immunity against viral replication in which viral transcription is repressed via the recruitment of antiviral proteins to the viral DNA.