ISG15 is an ubiquitin-like protein that is induced rapidly by interferon stimulation. Like ubiquitin, ISG15 forms covalent conjugates with its target proteins in a process called ISGylation, which in mammals is known to play a role in antiviral immunity. In contrast to mammalian ISG15, the function of teleost ISG15 is unclear. In this study, we identified and analyzed the function of an ISG15 homologue, CsISG15, from tongue sole (Cynoglossus semilaevis). CsISG15 is composed of 162 residues and possesses two tandem ubiquitin-like domains and the highly conserved LRGG motif found in all known ISG15. Expression of CsISG15 occurred in a wide range of tissues and was upregulated in kidney and spleen by viral and bacterial infection. In vitro study with primary head kidney (HK) lymphocytes showed that megalocytivirus infection caused induction of CsISG15 expression and extracellular release of CsISG15 protein. Purified recombinant CsISG15 (rCsISG15) activated HK macrophages and enhanced the expression of immune genes in HK lymphocytes, both these effects, however, were significantly reduced when the conserved LRGG sequence was mutated to LAAG. Further study showed that the presence of rCsISG15 during megalocytivirus infection of HK lymphocytes reduced intracellular viral load, whereas antibody blocking of CsISG15 enhanced viral infection. Likewise, interference with CsISG15 expression by RNAi promoted viral infection. Taken together, these results indicate that CsISG15, a teleost ISG15, promotes antiviral immune response and that, unlike mammalian ISG15, CsISG15 exerts its immunoregulatory effect in the form of an unconjugated extracellular cytokine. In addition, these results also suggest a role for the LRGG motif other than that in protein conjugation.