A vaccinia virus-encoded double-stranded RNA-binding protein, p25, has been previously implicated in inhibition of the interferon-induced, double-stranded RNA-activated protein kinase. In this study, we have identified the vaccinia viral gene (WR strain) that encodes p25. Amino acid sequence analysis of a chymotryptic fragment of p25 revealed a close match to the vaccinia virus (Copenhagen strain) E3L gene. The WR strain E3L gene was cloned and expressed either in COS-1 cells or in rabbit reticulocyte lysates in vitro. A M(r) 25,000 polypeptide that could bind to poly(rI).poly(rC)-agarose and that reacted with p25-specific antiserum was produced in each case. In addition, COS cells expressing E3L gene products inhibited activation of the double-stranded RNA-activated protein kinase in extracts from interferon-treated cells. Removal of E3L-encoded products by adsorption with anti-p25 antiserum resulted in loss of kinase inhibitory activity. These results demonstrate that the vaccinia virus E3L gene encodes p25 and that the products of the E3L gene have kinase inhibitory activity. Comparison of the deduced amino acid sequence of the E3L gene products with the protein sequence data base revealed a region closely related to the human interferon-induced, double-stranded RNA-activated protein kinase.