The cell line IPLB-LD-652Y, derived from the gypsy moth (Lymantria dispar L.), is routinely used to study interactions between viruses and insect hosts. Here we report the full genome sequence and biological characteristics of a small RNA virus, designated Lymantria dispar iflavirus 1 (LdIV1), that was discovered to persistently infect IPLB-LD-652Y. LdIV1 belongs to the genus Iflavirus. LdIV1 formed icosahedral particles of approx. 30 nm in diameter and contained a 10, 044 nt polyadenylated, positive-sense RNA genome encoding a predicted polyprotein of 2980 aa. LdIV1 was induced by a viral suppressor of RNA silencing, suggesting that acute infection is restricted by RNA interference (RNAi). We detected LdIV1 in all tested tissues of gypsy-moth larvae and adults, but the virus was absent from other L. dispar-derived cell lines. We confirmed LdIV1 infectivity in two of these cell lines (IPLB-LD-652 and IPLB-LdFB). Our results provide a novel system to explore persistent infections in lepidopterans and a new model for the study of iflaviruses, a rapidly expanding group of viruses, many of which covertly infect their hosts.