The stimulation of host gene expression by lytic gene products of Kaposi's sarcoma-associated herpesvirus (KSHV) has been proposed to play a critical role in KS development. We show, however, that lytic KSHV infection strongly inhibits host gene expression early in infection by accelerating global mRNA turnover. This function is mediated by KSHV ORF37, a homolog of a DNA exonuclease widely present in other herpesviruses but which in KSHV has uniquely evolved additional functions that mediate its participation in RNA degradation. The ability of KSHV to inhibit host gene expression has important implications for models of KS pathogenesis that invoke activation of host transcription in lytically infected cells as a source of angiogenic or oncogenic factors.