Innate immune signaling is essential for clearing pathogens and damaged cells and must be tightly regulated to avoid excessive inflammation or autoimmunity. Here, we found that the alternative splicing of exons derived from transposable elements is a key mechanism controlling immune signaling in human cells. By analyzing long-read transcriptome datasets, we identified numerous transposon exonization events predicted to generate functional protein variants of immune genes, including the type I interferon receptor IFNAR2. We demonstrated that the transposon-derived isoform of IFNAR2 is more highly expressed than the canonical isoform in almost all tissues and functions as a decoy receptor that potently inhibits interferon signaling, including in cells infected with severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). Our findings uncover a primate-specific axis controlling interferon signaling and show how a transposon exonization event can be co-opted for immune regulation.

Regulation of human interferon signaling by transposon exonization