Dengue virus (DENV) is the most common mosquito-transmitted virus infecting ~390 million people worldwide. In spite of this high medical relevance, neither a vaccine nor antiviral therapy is currently available. DENV elicits a strong interferon (IFN) response in infected cells, but at the same time actively counteracts IFN production and signaling. Although the kinetics of activation of this innate antiviral defense and the timing of viral counteraction critically determine the magnitude of infection and thus disease, quantitative and kinetic analyses are lacking and it remains poorly understood how DENV spreads in IFN-competent cell systems. To dissect the dynamics of replication versus antiviral defense at the single cell level, we generated a fully viable reporter DENV and host cells with authentic reporters for IFN-stimulated antiviral genes. We find that IFN controls DENV infection in a kinetically determined manner that at the single cell level is highly heterogeneous and stochastic. Even at high-dose, IFN does not fully protect all cells in the culture and, therefore, viral spread occurs even in the face of antiviral protection of naïve cells by IFN. By contrast, a vaccine candidate DENV mutant, which lacks 2'-O-methylation of viral RNA is profoundly attenuated in IFN-competent cells. Through mathematical modeling of time-resolved data and validation experiments we show that the primary determinant for attenuation is the accelerated kinetics of IFN production. This rapid induction triggered by mutant DENV precedes establishment of IFN-resistance in infected cells, thus causing a massive reduction of virus production rate. In contrast, accelerated protection of naïve cells by paracrine IFN action has negligible impact. In conclusion, these results show that attenuation of the 2'-O-methylation DENV mutant is primarily determined by kinetics of autocrine IFN action on infected cells.