Ovine herpesvirus 2 (OvHV-2) is a lymphotropic gammaherpesvirus that asymptomatically infects most sheep, but causes malignant catarrhal fever in cattle, bison, pigs and deer. There is no permissive cell culture system but OvHV-2-infected T lymphocytes can be cultured from diseased animals. We showed that the OvHV-2 genome was in a circular conformation in sheep peripheral blood mononuclear cells and that the latency-associated ORF73 was transcribed, while expression of the productive cycle genes ORF9 (DNA polymerase) and ORF50 (R-transactivator) was barely detectable, suggestive of latency. Doxorubicin treatment of these cells induced the appearance of linear viral DNA and transcription of productive cycle genes along with several viral unique genes. In contrast, cultured T cells from diseased cattle and rabbits contained a mixture of circular and linear genome configurations indicative of a mixture of latently- and productively-infected cells. Most of the OvHV-2 unique genes were transcribed in these cells but ORF50 expression was only seen after doxorubicin treatment indicating a 'leaky' latent pattern of gene expression. 5-azacytidine treatment increased the proportion of circular DNA and inhibited the expression of most of the OvHV-2 unique genes except Ov2.5 (vIL-10) and Ov4.5 (Bcl-2 homologue) in the cattle cell line. These studies provide key insights into the differences in OvHV-2 gene expression in cells from reservoir and susceptible species and, for the first time, an in vitro system for studying the latent and productive phases of the OvHV-2 virus life cycle.