The Sendai virus (SeV) C gene codes for a nested set of four C proteins that carry out several functions, including the modulation of viral RNA synthesis and countering of the cellular antiviral response. Using mutant C genes (and in particular a C gene with a deletion of six amino acids present only in the larger pair of C proteins) and recombinant SeV carrying these mutant C genes, we find that the nested set of C proteins carry out a nested set of functions. All of the C proteins interdict interferon (IFN) signaling to IFN-stimulated genes (ISGs) and prevent pY701-Stat1 formation. However, only the larger C proteins can induce STAT1 instability, prevent IFN from inducing an antiviral state, or prevent programmed cell death. Remarkably, interdiction of IFN signaling to ISGs and the absence of pY701-Stat1 formation did not prevent IFN-alpha from inducing an anti-Vesicular stomatitis virus (VSV) state. It is possible that IFN-alpha signaling to induce an anti-VSV state can occur independently of the well-established Jak/Stat/ISGF3 pathway and that it is this parallel pathway that is targeted by the longer C proteins.