Abstract Type I interferon (IFN) signalling induces the expression of several hundred IFN-stimulated genes (ISGs) that provide an unfavourable environment for viral replication. To prevent an overexuberant response and autoinflammatory disease, IFN signalling requires tight control. One critical regulator is the ubiquitin-like protein ISG15, evidenced by autoinflammatory disease in patients with inherited ISG15 deficiencies. Current models suggest that ISG15 stabilises USP18, a well-established negative regulator of IFN signalling. USP18 also functions as an ISG15-specific peptidase that cleaves ISG15 from ISGylated proteins; however, USP18’s catalytic activity is dispensable for controlling IFN signalling. Here, we show that the ISG15-dependent stabilisation of USP18 involves transient hydrophobic interactions. Nonetheless, while USP18 stabilisation is necessary, it is not sufficient for regulation of IFN signalling. USP18 requires non-covalent interactions with the ISG15 C-terminal diGlycine motif to promote its regulatory function. This trait may have been acquired in humans through co-option of a binding mechanism normally reserved for deISGylation, identifying an unexpected new function for human ISG15.

A co-opted ISG15-USP18 binding mechanism normally reserved for deISGylation controls type I IFN signalling