The switch from Epstein-Barr virus (EBV) latent infection to lytic replication is governed by two transcriptional regulators, Zta and Rta. We previously reported that the EBV protein encoded by the LF2 gene binds to Rta and can inhibit Rta activity in reporter gene assays. We now report that LF2 associates with Rta in the context of EBV-infected cells induced for lytic replication. LF2 inhibition of Rta occurs in both epithelial and B cells, and this downregulation is promoter specific: LF2 decreases Rta activation of the BALF2, BMLF1, and BMRF1 promoters by 60 to 90% but does not significantly decrease Rta activation of its own promoter (Rp). LF2 decreases Rta activation by at least two mechanisms: decreased DNA binding and interference with transcriptional activation by the Rta acidic activation domain. Coexpression of LF2 also specifically induces modification of Rta by the small ubiquitin-like modifiers SUMO2 and SUMO3. We further demonstrate that LF2 overexpression blocks lytic activation in EBV-infected cells induced with Rta or Zta. Our results demonstrate that LF2, a gene deleted from the EBV reference strain B95-8, encodes a potent inhibitor of EBV replication, and they suggest that future studies of EBV replication need to account for the potential effects of LF2 on Rta activity.