Large-scale sequence analyses of influenza viruses revealed that nonstructural 1 (NS1) proteins from avian influenza viruses have a conserved C-terminal ESEV amino acid motif, while NS1 proteins from typical human influenza viruses have a C-terminal RSKV motif. To test the influence of the C-terminal domains of NS1 on the virulence of an avian influenza virus, we generated a wild-type H7N1 virus with an ESEV motif and a mutant virus with an NS1 protein containing a C-terminal RSKV motif by reverse genetics. We compared the phenotypes of these viruses in vitro in human, mouse, and duck cells as well as in vivo in mice and ducks. In human cells, the human C-terminal RSKV domain increased virus replication. In contrast, the avian C-terminal ESEV motif of NS1 increased virulence in mice. We linked this increase in pathogenicity in mice to an increase in virus replication and to a more severe lung inflammation associated with a higher level of production of type I interferons. Interestingly, the human C-terminal RSKV motif of NS1 increased viral replication in ducks. H7N1 virus with a C-terminal RSKV motif replicated to higher levels in ducks and induced higher levels of Mx, a type I interferon-stimulated gene. Thus, we identify the C-terminal domain of NS1 as a species-specific virulence domain.