RNA synthesis by negative-strand RNA viruses (NSVs) involves transcription of subgenomic mRNAs and replication of ribonucleoprotein complexes. In this study, the envelope matrix (M) protein of rabies virus (RV) was identified as a factor which inhibits transcription and stimulates replication. Transcription, but not replication, of RV minigenomes or of full-length RV was decreased by expression of heterologous M. Since RV assembly involving M and the glycoprotein G renders virus synthetically quiescent, an RV was generated with the M and G genes substituted by placeholders. Surprisingly, RNA synthesis by this recombinant was characterized not only by an increased transcription rate but also by a diminished accumulation of replication products. This phenotype was reversed in a dose-dependent manner by providing M in trans, showing that M is a replication-stimulatory factor. The role of M in determining the balance of replication and transcription was further exploited by generation of a recombinant RV with attenuated M expression, which is highly active in transcription. Regulation of RNA synthesis by matrix proteins may represent a general mechanism of nonsegmented NSVs, which is probably obscured by the silencing activity of M during virus assembly.