Orf virus (ORFV), the type member of the genus Parapoxvirus of the Poxviridae, has evolved novel strategies (proteins and/or mechanisms of action) to modulate host cell responses regulated by the nuclear factor-κB (NF-κB) signaling pathway. Here, we present data indicating that ORFV ORFV121, a gene unique to parapoxviruses, encodes a novel viral NF-κB inhibitor that binds to and inhibits the phosphorylation and nuclear translocation of NF-κB-p65. The infection of cells with an ORFV121 deletion mutant virus (OV-IA82Δ121) resulted in increased NF-κB-mediated gene transcription, and the expression of ORFV121 in cell cultures significantly suppressed NF-κB-regulated reporter gene expression. ORFV ORFV121 physically interacts with NF-κB-p65 in the cell cytoplasm, thus providing a mechanism for the inhibition of NF-κB-p65 phosphorylation and nuclear translocation. Notably, the deletion of ORFV121 from the viral genome markedly decreased ORFV virulence and disease pathogenesis in sheep, indicating that ORFV121 is a virulence determinant for ORFV in the natural host.