Positive-strand RNA viruses encompass more than one-third of known virus genera and include many medically and agriculturally relevant human, animal, and plant pathogens. The nematode Caenorhabditis elegans and its natural pathogen, the positive-strand RNA virus Orsay, have recently emerged as a new animal model to understand the mechanisms and evolution of innate immune responses. In particular, the RNA interference (RNAi) pathway is required for C. elegans resistance to viral infection. Here we report the first genome-wide analyses of gene expression upon viral infection in C. elegans. Using the laboratory strain N2, we identify a novel C. elegans innate immune response specific to viral infection. A subset of these changes is driven by the RNAi response to the virus, which redirects the Argonaute protein RDE-1 from its endogenous small RNA cofactors, leading to loss of repression of endogenous RDE-1 targets. Additionally, we show that a C. elegans wild isolate, JU1580, has a distinct gene expression signature in response to viral infection. This is associated with a reduction in microRNA (miRNA) levels and an up-regulation of their target genes. Intriguingly, alterations in miRNA levels upon JU1580 infection are associated with a transformation of the antiviral transcriptional response into an antibacterial-like response. Together our data support a model whereby antiviral RNAi competes with endogenous small RNA pathways, causing widespread transcriptional changes. This provides an elegant mechanism for C. elegans to orchestrate its antiviral response, which may have significance for the relationship between small RNA pathways and immune regulation in other organisms.