The interferon inducible protein, BST-2 (or, tetherin), plays an important role in the innate antiviral defense system by inhibiting the release of many enveloped viruses. Consequently, viruses have evolved strategies to counteract the anti-viral activity of this protein. While the mechanisms by which BST-2 prevents viral dissemination have been defined, less is known about how this protein shapes the early viral distribution and immunological defense against pathogens during the establishment of persistence. Using the lymphocytic choriomeningitis virus (LCMV) model of infection, we sought insights into how the in vitro antiviral activity of this protein compared to the immunological defense mounted in vivo. We observed that BST-2 modestly reduced production of virion particles from cultured cells, which was associated with the ability of BST-2 to interfere with the virus budding process mediated by the LCMV Z protein. Moreover, LCMV does not encode a BST-2 antagonist, and viral propagation was not significantly restricted in cells that constitutively expressed BST-2. In contrast to this very modest effect in cultured cells, BST-2 played a crucial role in controlling LCMV in vivo. In BST-2 deficient mice, a persistent strain of LCMV was no longer confined to the splenic marginal zone at early times post-infection, which resulted in an altered distribution of LCMV-specific T cells, reduced T cell proliferation / function, delayed viral control in the serum, and persistence in the brain. These data demonstrate that BST-2 is important in shaping the anatomical distribution and adaptive immune response against a persistent viral infection in vivo.