Mosquito-transmitted flavivirus Rocio (ROCV) was responsible for an outbreak of encephalitis in the Ribeira Valley, located in the south coast of Sao Paulo State, Brazil, in 1975-1976. ROCV also causes fatal encephalitis in adult mice. Seroprevalence studies in humans, horses and water buffaloes in different regions of Brazil have suggested that ROCV is still circulating in the country, indicating the risk of re-emergence of this virus. West Nile virus (WNV) is also a mosquito-transmitted encephalitic flavivirus, however, WNV strains circulating in Australia have not been associated with outbreaks of disease in humans and exhibit low virulence in adult mice. To identify viral determinants of ROCV virulence, we have generated reciprocal chimeric viruses between ROCV and the Australian strain of WNV by swapping structural prM and E genes. Chimeric WNV containing ROCV prM-E genes replicated more efficiently than WNV or chimeric ROCV containing WNV prM-E genes in mammalian cells, was as virulent as ROCV in adult mice, and inhibited type I IFN signaling as efficiently as ROCV. The results show that ROCV prM and E proteins are major virulence determinants and identify unexpected function of these proteins in inhibition of type I interferon response.