Kaposi's sarcoma-associated herpesvirus (KSHV) has been linked to the development of Kaposi's sarcoma, a major AIDS-associated malignancy, and to hematologic malignancies, including primary effusion lymphoma and multicentric Castleman's disease. Like other herpesviruses, KSHV is capable of both latent and lytic replication. Understanding the molecular details associated with this transition from latency to lytic replication is key to controlling virus spread and can affect the development of intervention strategies. Here, we report that Kruppel-associated box domain-associated protein-1 (KAP-1)/transcriptional intermediary factor 1beta, a cellular transcriptional repressor that controls chromosomal remodeling, participates in the process of switching viral latency to lytic replication. Knockdown of KAP-1 by small interfering RNA leads to KSHV reactivation mediated by K-Rta, a key transcriptional regulator. In cells harboring latent KSHV, KAP-1 was associated with the majority of viral lytic-gene promoters. K-Rta overexpression induced the viral lytic cycle with concomitant reduction of KAP-1 binding to viral promoters. Association of KAP-1 with heterochromatin was modulated by both sumoylation and phosphorylation. During lytic replication of KSHV, KAP-1 was phosphorylated at Ser(824). Several lines of evidence directly linked the viral protein kinase to this post-translational modification. Additional studies showed that this phosphorylation of KAP-1 produced a decrease in its sumoylation, consequently decreasing the ability of KAP-1 to condense chromatin on viral promoters. In summary, the cellular transcriptional repressor KAP-1 plays a role in regulating KSHV latency, and viral protein kinase modulates the chromatin remodeling function of this repressor.