Ubiquitin-like protein ISG15, which is robustly induced by IFN or virus, is implicated to inhibit influenza A virus (IAV) in vivo. But the underlying mechanism still remains largely unknown. In this study, we report that Herc5 could catalyze conjugation of ISG15 onto IAV-NS1 protein, the critical virulence factor of IAV. This modification produces two more species, respectively mapped to IAV-NS1 at lysine 20, 41, 217, 219, and 108, 110, and 126. The ISGylated IAV-NS1 fails to form homodimers and inhibits relevant antiviral processes. Knockdown of Herc5 or ISG15 could partially alleviate IFN-beta-induced antiviral activities against IAV, whereas ectopic expression of the Herc5-mediated ISGylation system could distinctly potentiate IFN-beta-induced antiviral effects against IAV. Notably, IAV-NS1s of H5N1 avian IAVs display less ISGylation species than that of IAV-PR8/34 (human H1N1). Consistently, IAV-PR8/34 mutants deprived of IAV-NS1's ISGylation exhibit augmented viral propagation and virulence in both cultured cells and mice. Our study reports the first microbial target of ISGylation and uncovers the direct antiviral function and mechanism of this novel modification.