The interferon (IFN) system is an extremely powerful antiviral response that is capable of controlling most, if not all, virus infections in the absence of adaptive immunity. However, viruses can still replicate and cause disease in vivo, because they have some strategy for at least partially circumventing the IFN response. We reviewed this topic in 2000 [Goodbourn, S., Didcock, L. & Randall, R. E. (2000). J Gen Virol 81, 2341-2364] but, since then, a great deal has been discovered about the molecular mechanisms of the IFN response and how different viruses circumvent it. This information is of fundamental interest, but may also have practical application in the design and manufacture of attenuated virus vaccines and the development of novel antiviral drugs. In the first part of this review, we describe how viruses activate the IFN system, how IFNs induce transcription of their target genes and the mechanism of action of IFN-induced proteins with antiviral action. In the second part, we describe how viruses circumvent the IFN response. Here, we reflect upon possible consequences for both the virus and host of the different strategies that viruses have evolved and discuss whether certain viruses have exploited the IFN response to modulate their life cycle (e.g. to establish and maintain persistent/latent infections), whether perturbation of the IFN response by persistent infections can lead to chronic disease, and the importance of the IFN system as a species barrier to virus infections. Lastly, we briefly describe applied aspects that arise from an increase in our knowledge in this area, including vaccine design and manufacture, the development of novel antiviral drugs and the use of IFN-sensitive oncolytic viruses in the treatment of cancer.