Coronaviruses express a deubiquitinating protein, the papain-like protease-2 (PLP2), that removes both ubiquitin and the ubiquitin-like interferon (IFN)-stimulated gene 15 (ISG15) protein from target proteins. ISG15 has antiviral activity against a number of viruses; therefore, we examined the effect of ISG15 conjugation (ISGylation) in a model of acute viral hepatitis induced by the murine hepatitis virus strain 3 (MHV-3) coronavirus. Mice deficient in the ISG15 deconjugating enzyme, ubiquitin-specific peptidase-18 (USP18), accumulate high levels of ISG15-conjugated proteins and are hypersensitive to type I IFN. Infecting USP18-/- mice with MHV-3 resulted in extended survival (8 ยฑ 1.2 versus 4 days) and in improved liver histology, a decreased inflammatory response, and viral titers 1 to 2 logs lower than in USP18+/+ mice. The suppression of viral replication was not due to increased IFN since infected USP18-/- mice had neither increased hepatic IFN-ฮฑ, -ฮฒ, or -ฮณ mRNA nor circulating protein. Instead, delayed MHV-3 replication coincided with high levels of cellular ISGylation. Decreasing ISGylation by knockdown of the ISG15 E1 enzyme, Ube1L, in primary USP18+/+ and USP18-/- hepatocytes led to increased MHV-3 replication. Both in vitro and in vivo, increasing MHV-3 titers were coincident with increased PLP2 mRNA and decreased ISGylation over the course of infection. The pharmacologic inhibition of the PLP2 enzyme in vitro led to decreased MHV-3 replication. Overall, these results demonstrate the antiviral effect of ISGylation in an in vivo model of coronavirus-induced mouse hepatitis and illustrate that PLP2 manipulates the host innate immune response through the ISG15/USP18 pathway. ยฉ 2014, American Society for Microbiology.