The ability of interferons to protect cells from viral infection depends on the activation of multiple interferon-stimulated genes that together induce an anti-viral state. One of the genes is Interferon Stimulated Gene 54 (ISG54/IFIT2), coding for a 54kDa protein with a highly segmented structure rich in tetratricopeptide (TPR) motifs. We discovered that ISG54 promotes apoptosis in cancer cell lines, and that shRNA knockdown of ISG54 significantly reduced cell death in response to interferon. ISG54-mediated apoptosis proceeds by the mitochondrial pathway and requires the presence of Bax and Bak proteins. The anti-apoptotic B-cell lymphoma (Bcl-xL) effectively blocks ISG54-mediated apoptosis. In addition, anti-apoptotic proteins: adenoviral E1B-19K, and gammaherpesvirus v-Bcl2 and M11, also block apoptosis induced by ISG54. Activation of caspase-3 was apparent in the ISG54 expressing cells, and the pan-caspase inhibitor ZVAD-FMK was found to block ISG54-induced cell death. A decrease of mitochondrial potential, and translocation of Bax into the mitochondrial compartment were also detected in ISG54 expressing cells. ISG54-mediated apoptosis was found to be p53 independent but could be partially inhibited by overexpression of H-Ras, PI3K and Akt. Our further studies revealed that ISG54 interacts with other members of its family: ISG56 and ISG60 and that together they form an oligomeric structure at ~150-250kDa. ISG60 was found to inhibit the pro-apoptotic functions of ISG54 and that effect was dependent on a direct interaction between ISG60 and the first TPR domain of ISG54. Moreover, ISG54 was found to interact with other binding partners such as STING, DLC1, PRDX5 and eEF1alpha. We generated ISG54 knockout mice and evaluated the protective role of ISG54 during infection with Mouse Gamma Herpesvirus 68 (MHV68). We discovered that the ISG54 knockout facilitates MHV68 replication in embryonic fibroblasts in culture, especially at low multiplicities of infection. In vivo infections of the ISG54 knockout animals showed an increased viral latency as measured by viral genomes in the spleen and ex vivo viral reactivation. Together our data suggest that ISG54 may be important part of the interferon system responsible for both anti-viral and anti-cancer effects. Elucidating mechanisms of ISG54 action may help to improve existing therapies against cancer and viral diseases.