Cellular messenger RNA (mRNA) of higher eukaryotes and many viral RNAs are methylated at the N-7 and 2'-O positions of the 5' guanosine cap by specific nuclear and cytoplasmic methyltransferases (MTases), respectively. Whereas N-7 methylation is essential for RNA translation and stability, the function of 2'-O methylation has remained uncertain since its discovery 35 years ago. Here we show that a West Nile virus (WNV) mutant (E218A) that lacks 2'-O MTase activity was attenuated in wild-type primary cells and mice but was pathogenic in the absence of type I interferon (IFN) signalling. 2'-O methylation of viral RNA did not affect IFN induction in WNV-infected fibroblasts but instead modulated the antiviral effects of IFN-induced proteins with tetratricopeptide repeats (IFIT), which are interferon-stimulated genes (ISGs) implicated in regulation of protein translation. Poxvirus and coronavirus mutants that lacked 2'-O MTase activity similarly showed enhanced sensitivity to the antiviral actions of IFN and, specifically, IFIT proteins. Our results demonstrate that the 2'-O methylation of the 5' cap of viral RNA functions to subvert innate host antiviral responses through escape of IFIT-mediated suppression, and suggest an evolutionary explanation for 2'-O methylation of cellular mRNA: to distinguish self from non-self RNA. Differential methylation of cytoplasmic RNA probably serves as an example for pattern recognition and restriction of propagation of foreign viral RNA in host cells.