The apicomplexan parasite, Theileria annulata, dedifferentiates and induces continuous division of infected bovine myeloid cells. Re-expression of differentiation markers and a loss of proliferation occur upon treatment with buparvaquone, implying that parasite factors actively maintain the altered status of the infected cell. The factors that induce this unique transformation event have not been identified. However, parasite polypeptides (TashAT family) that are located in the infected leucocyte nucleus have been postulated to function as modulators of host cell phenotype. In this study differential RNA display and proteomic analysis were used to identify altered mRNA and polypeptide expression profiles in a bovine macrophage cell line (BoMac) transfected with TashAT2. One of the genes identified by differential display was found to encode an ubiquitin-like protease (bUBP43) belonging to the UBP43 family. The bUBP43 gene and the gene encoding its ubiquitin-like substrate, bISG15, were expressed at a low level in T. annulata-infected cells. However, infected cells were refractory to induction of elevated bISG15 expression by lipopolysaccharide or type 1 interferons while TashAT2-transfected cells showed no induction when treated with camptothecin. Modulation of the ISGylation system may be of relevance to the establishment of the transformed infected host cell, as ISGylation is associated with resistance to intracellular infection by pathogens, stimulation of the immune response and terminal differentiation of leukaemic cells.