Innate cytokine response provides the first line of defense against influenza virus infection. However, excessive production of cytokines appears to be critical in the pathogenesis of influenza virus. Interferon lambdas (IFN-λ) have been shown to be overproduced during influenza virus infection, but the precise pathogenic processes of IFN-λ production have yet to be characterized. In this report, we observed that influenza virus induced robust expression of IFN-λ in alveolar epithelial cells (A549) mainly through a RIG-I-dependent pathway, but IFN-λ-induced phosphorylation of the signal transducer and activator of transcription protein 1 (STAT1) was dramatically inhibited in the infected cells. Remarkably, influenza virus infection induced robust expression of suppressor of cytokine signaling-1 (SOCS-1), leading to inhibition of STAT1 activation. Interestingly, the virus-induced SOCS-1 expression was cytokine-independent at early stage of infection both in vitro and in vivo. Using transgenic mouse model and distinct approaches altering the expression of SOCS-1 or activation of STAT signaling, we demonstrated that disruption of the SOCS-1 expression or expression of constitutively active STAT1 significantly reduced the production of IFN-λ during influenza virus infection. Furthermore, we revealed that disruption of IFN-λ signaling pathway by increased SOCS-1 protein resulted in the activation of NF-κB and thereby enhanced the IFN-λ expression. Together, these data imply that suppression of IFN-λ signaling by virus-induced SOCS-1 causes an adaptive increase in IFN-λ expression by host to protect cells against the viral infection, as a consequence, leading to excessive production of IFN-λ with impaired antiviral response.