TFIIS-like transcript cleavage factors enhance the processivity and fidelity of archaeal and eukaryotic RNA polymerases. Sulfolobus solfataricus TFS1 functions as a bona fide cleavage factor, while the paralogous TFS4 evolved into a potent RNA polymerase inhibitor. TFS4 destabilises the TBP-TFB-RNAP pre-initiation complex and inhibits transcription initiation and elongation. All inhibitory activities are dependent on three lysine residues at the tip of the C-terminal zinc ribbon of TFS4; the inhibition likely involves an allosteric component and is mitigated by the basal transcription factor TFEα/β. A chimeric variant of yeast TFIIS and TFS4 inhibits RNAPII transcription, suggesting that the molecular basis of inhibition is conserved between archaea and eukaryotes. TFS4 expression in S. solfataricus is induced in response to infection with the S ulfolobus turreted icosahedral virus. Our results reveal a compelling functional diversification of cleavage factors in archaea, and provide novel insights into transcription inhibition in the context of the host-virus relationship.