Epstein-Barr virus (EBV), like many other persistent herpes viruses, has acquired numerous mechanisms for subverting or evading immune surveillance. This study investigates the role of secreted EBV-encoded BARF1 protein (sBARF1) in creating an immune evasive microenvironment. Wild-type consensus BARF1 was expressed in the human 293 cell line and purified. This native hexameric sBARF1 had inhibitory capacity on macrophage colony stimulating factor (M-CSF)-stimulated, and not on granulocyte macrophage-colony stimulating factor (GM-CSF)-stimulated growth and differentiation of myeloid cells. Antibodies specific to hexameric sBARF1 were able to block this effect. M-CSF was shown to interact with sBARF1 via the protruding N-terminal loops involving Val38 and Ala84. Each BARF1 hexamer was capable of binding three M-CSF dimers. Mutations in the BARF1 loops greatly affected M-CSF interaction, and showed loss of growth inhibition. Analysis of the activation state of the M-CSF receptor c-fms and its downstream kinase pathways showed that sBARF1 prevented M-CSF-induced downstream phosphorylation. Since M-CSF is an important factor in macrophage differentiation, the effect of sBARF1 on the function of monocyte-derived macrophages was evaluated. sBARF1 affected overall survival and morphology and significantly reduced expression of macrophage differentiation surface markers such as CD14, CD11b, CD16, and CD169. Macrophages differentiating in the presence of sBARF1 showed impaired responses to lipopolysaccharide and decreased oxygen radical formation as well as reduced phagocytosis of apoptotic cells. In conclusion, EBV sBARF1 protein is a potent decoy receptor for M-CSF, hampering the function and differentiation of macrophages. These results suggest that sBARF1 contributes to the modulation of immune responses in the microenvironment of EBV-positive carcinomas.