We have studied the relationship between the Sendai virus (SeV) C proteins (a nested set of four proteins initiated at different start codons) and the interferon (IFN)-mediated antiviral response in IFN-competent cells in culture. SeV strains containing wild-type or various mutant C proteins were examined for their ability (i) to induce an antiviral state (i.e., to prevent the growth of vesicular stomatitis virus [VSV] following a period of SeV infection), (ii) to induce the elevation of Stat1 protein levels, and (iii) to prevent IFN added concomitant with the SeV infection from inducing an antiviral state. We find that expression of the wild-type C gene and, specifically, the AUG114-initiated C protein prevents the establishment of an antiviral state: i.e., cells infected with wild-type SeV exhibited little or no increase in Stat1 levels and were permissive for VSV replication, even in the presence of exogenous IFN. In contrast, in cells infected with SeV lacking the AUG114-initiated C protein or containing a single amino acid substitution in the C protein, the level of Stat1 increased and VSV replication was inhibited. The prevention of the cellular IFN-mediated antiviral response appears to be a key determinant of SeV pathogenicity.