The parapoxvirus orf virus (ORFV) is a pathogen of sheep and goats that has been used as a preventive and therapeutic immunomodulatory agent in several animal species. However, the functions (genes, proteins, and mechanisms of action) evolved by ORFV to modulate and manipulate immune responses are poorly understood. Here, the novel ORFV protein ORFV024 was shown to inhibit activation of the NF-kappaB signaling pathway, an important modulator of early immune responses against viral infections. Infection of primary ovine cells with an ORFV024 deletion mutant virus resulted in a marked increase in expression of NF-kappaB-regulated chemokines and other proinflammatory host genes. Expression of ORFV024 in cell cultures significantly decreased lipopolysaccharide (LPS)- and tumor necrosis factor alpha (TNF-alpha)-induced NF-kappaB-responsive reporter gene expression. Further, ORFV024 expression decreased TNF-alpha-induced phosphorylation and nuclear translocation of NF-kappaB-p65, phosphorylation, and degradation of IkappaBalpha, and phosphorylation of IkappaB kinase (IKK) subunits IKKalpha and IKKbeta, indicating that ORFV024 functions by inhibiting activation of IKKs, the bottleneck for most NF-kappaB activating stimuli. Although ORFV024 interferes with activation of the NF-kappaB signaling pathway, its deletion from the OV-IA82 genome had no significant effect on disease severity, progression, and time to resolution in sheep, indicating that ORFV024 is not essential for virus virulence in the natural host. This represents the first description of a NF-kappaB inhibitor encoded by a parapoxvirus.