The transcription factor, interferon regulatory Factor 3 (IRF-3) plays a critical role in the activation of an antiviral innate immune response. However the transcriptional activity of IRF-3 is tightly regulated by a proteosome mediated degradation. We describe here a novel mechanism by which the activity of IRF-3 is stabilized in infected cells. We have shown that both interferon treatment and NDV infection profoundly increase conjugation of interferon induced ubiquitin- like protein ISG15 to cellular proteins. ISGylated IRF-3 could be detected both in interferon treated and virus-infected cells. ISG15, subverts the ubiquitin mediated degradation of IRF-3 in NDV infected 2fTGH cells and enhances the NDV mediated transactivation of interferonbeta promoter and the translocation of activated IRF-3 to the nucleus. The relative levels of IRF-3 were significantly lower in NDV infected ISG15 null MEF, than in wt MEF. While ISG15 null MEF were more permissive to VSV replication their sensitivity to the antiviral effect of interferon was not modulated. These results reveal that virus mediated subversion of the antiviral response by proteolysis of IRF-3 is counteracted by induction of ISG15 expression and that ISGylation provides a feedback mechanism, which enhances the host innate antiviral response via IRF-3 stabilization.