The interferons (IFNs) are cytokines that play key roles in host defense against viral infections and immune surveillance against cancer. We report that BCR-ABL transformation of hematopoietic cells results in suppression of IFN-dependent responses, including transcription of IFN-inducible genes and generation of IFN-mediated antiviral effects. BCR-ABL transformation suppresses expression of several IFN-regulated genes containing IFN-sensitive response element (ISRE) or GAS elements in their promoters, including Isg15, Irf1, Irf9, and Ifit2 (interferon-induced protein with tetratricopeptide repeats 2). Suppression of transcription of ISRE-containing genes is also seen in cells expressing various BCR-ABL kinase domain mutants, including T315I, H396P, Y253F, and E255K, but not kinase-defective BCR-ABL. Such effects are associated with impaired IFN-dependent phosphorylation of Stat1 on Tyr(701) and Stat3 on Tyr(705) and defective binding of Stat complexes to ISRE or GAS elements. Beyond suppression of Stat activities, BCR-ABL inhibits IFN-inducible phosphorylation/activation of the p38 MAPK, suggesting a dual mechanism by which this abnormal fusion protein blocks IFN transcriptional responses. The inhibitory activities of BCR-ABL ultimately result in impaired IFNalpha-mediated protection against encephalomyocarditis virus infection and reversal of IFN-dependent growth suppression. Altogether, our data provide evidence for a novel mechanism by which BCR-ABL impairs host defenses and promotes malignant transformation, involving dual suppression of IFN-activated signaling pathways.