Host cells respond to viral infection by the production of type I interferons (IFNs), which induce the expression of antiviral genes. Herpes simplex virus I (HSV-1) encodes many mechanisms that inhibit the type I IFN response, including the ICP27-dependent inhibition of type I IFN signaling. Here we show inhibition of Stat-1 nuclear accumulation in cells that express ICP27. ICP27 expression also induces the secretion of a small, heat-stable type I IFN antagonizing protein that inhibits Stat-1 nuclear accumulation. We show that the inhibition of IFN-induced Stat-1 phosphorylation occurs at or upstream of Jak-1 phosphorylation. Finally, we show that ISG15 expression is induced after IFNalpha treatment in mock-infected cells, but not cells infected with WT HSV-1 or ICP27(-) HSV-1. These data suggest that HSV-1 has evolved multiple mechanisms to inhibit IFN signaling not only in infected cells, but also in neighboring cells, thereby allowing for increased viral replication and spread.