The poxviruses have evolved a diverse array of proteins which serve to subvert innate and adaptive host responses that abort or at least limit viral infections. Myxoma virus and its rabbit host are considered to represent an ideal poxvirus-host system in which to study the effects of these immunomodulatory proteins. Studies of laboratory rabbits (Oryctolagus cuniculus) infected with gene knockout variants of myxoma virus have provided compelling evidence that several myxoma virus gene products contribute to the pathogenic condition known as myxomatosis. However, myxomatosis, which is characterized by skin lesions, systemic immunosuppression, and a high mortality rate, does not occur in the virus' natural South American host, Sylvilogus brasiliensis. Moreover, in Australia where myxoma virus was willfully introduced to control populations of O. cuniculus, myxomatosis-resistant rabbits emerged within a year of myxoma virus introduction into the field. In this review I discuss the characterized immunomodulatory proteins of myxoma virus, their biochemical properties, their pathogenic effects in laboratory rabbits, the role of the host immune system in the susceptibility or resistance to myxomatosis, and the evidence that immunomodulatory genes may have been attenuated during the co-adaptation of myxoma virus and O. cuniculus in Australia.