Type I interferons (interferon [IFN]-alpha/beta) are key mediators of innate antiviral responses. Inhibition of IFN-mediated signal transduction by dengue viruses (DENVs), mosquito-borne flaviviruses of immense global health importance, probably plays a crucial role in determining the outcome of the virus-host interaction. Understanding the molecular basis of IFN antagonism by DENV would therefore provide critical insight into disease pathogenesis and new opportunities for development of antiviral therapies and rationally attenuated vaccines. Here we examine the effects of expression of DENV nonstructural proteins on cellular IFN responses. We show that expression of nonstructural protein 5 (NS5) alone inhibits IFN-alpha, but not IFN-gamma, signaling. Expression of the polymerase domain of NS5 is sufficient to inhibit IFN-alpha signaling. NS5 binds signal transducer and activator of transcription 2 (STAT2) and inhibits its phosphorylation. NS5 alone did not, however, induce degradation of STAT2, which occurs when all nonstructural proteins are expressed together. We conclude that DENV NS5 is a potent and specific type I IFN antagonist.