Sendai virus (SeV) infection of interferon (IFN)-competent cells is one of the most efficient ways of inducing IFN production. Virus replication is nevertheless largely unaffected, since SeV infection also interfers with IFN action, a prerequisite for the establishment of an antiviral state. This property has been mapped by reverse genetics to the viral C gene, which is also known to act as a promoter-specific inhibitor of viral RNA synthesis. Using luciferase reporter plasmids containing IFN-responsive promoters, we have found that all four C proteins effectively interdict IFN signaling when expressed independently of SeV infection. The C proteins must therefore interact directly with cellular components to carry this out. The C gene in the context of an SeV infection was also found to induce STAT1 instability in some cells, whereas in other cells it apparently acts to prevent the synthesis of STAT1 in response to the virus infection or IFN treatment. The SeV C proteins appear to act in at least two ways to counteract the IFN induced by SeV infection.