The Kaposi's sarcoma-associated herpesvirus (KSHV) genome encodes a G protein-coupled receptor (vGPCR). vGPCR is a ligand-independent, constitutively active signaling molecule that promotes cell growth and proliferation; however, it is not clear how vGPCR is negatively regulated. We report here that the KSHV K7 small membrane protein interacts with vGPCR and induces its degradation, thereby dampening vGPCR signaling. K7 interaction with vGPCR is readily detected in transiently transfected human cells. Mutational analyses reveal that the K7 transmembrane domain is necessary and sufficient for this interaction. Biochemical and confocal microscopy studies indicate that K7 retains vGPCR in the endoplasmic reticulum (ER) and induces vGPCR proteasomeal degradation. Indeed, the knockdown of K7 by shRNA-mediated silencing increases vGPCR protein expression in BCBL-1 cells that are induced for KSHV lytic replication. Interestingly, K7 expression significantly reduces vGPCR tumorigenicity in nude mice. These findings define a viral factor that negatively regulates vGPCR protein expression and reveal a post-translational event that modulates GPCR-dependent transformation and tumorigenicity.