Poxviruses encode a broad range of proteins that interfere with host immune functions, such as soluble versions of receptors for the cytokines tumor necrosis factor, interleukin-1 beta, gamma interferon (IFN-gamma), IFN-alpha/beta, and chemokines. These virus-encoded cytokine receptors have a profound effect on virus pathogenesis and enable the study of the role of cytokines in virus infections. The vaccinia virus (VV) Western Reserve gene B18R encodes a secreted protein with 3 immunoglobulin domains that functions as a soluble receptor for IFN-alpha/beta. We have found that after secretion B18R binds to both uninfected and infected cells. The B18R protein present at the cell surface maintains the properties of the soluble receptor, binding IFN-alpha/beta with high affinity and with broad species specificity, and protects cells from the antiviral state induced by IFN-alpha/beta. VV strain Wyeth expressed a truncated B18R protein lacking the C-terminal immunoglobulin domain. This protein binds IFN with lower affinity and retains its ability to bind to cells, indicating that the C-terminal region of B18R contributes to IFN binding. The replication of a VV B18R deletion mutant in tissue culture was restricted in the presence of IFN-alpha, whereas the wild-type virus replicated normally. Binding of soluble recombinant B18R to cells protected the cultures from IFN and allowed VV replication. This represents a novel strategy of virus immune evasion in which secreted IFN-alpha/beta receptors not only bind the soluble cytokine but also bind to uninfected cells and protect them from the antiviral effects of IFN-alpha/beta, maintaining the cells' susceptibility to virus infections. The adaptation of this soluble receptor to block IFN-alpha/beta activity locally will help VV to replicate in the host and spread in tissues. This emphasizes the importance of local effects of IFN-alpha/beta against virus infections.