The transformation of B cells by Epstein-Barr virus (EBV), into lymphoblastoid cell lines (LCLs) results in the upregulation of STAT1, a key transcription factor in the interferon signalling pathway. Although the mechanism of EBV induction of STAT1 protein expression has been intensively studied, there has been little investigation into the function of STAT1 in EBV-transformed LCLs. In this study, we have implemented a novel strategy to investigate the functional role of STAT1 through the introduction of the simian virus 5 (SV5) V-protein into LCLs by retroviral gene transfer. The V-protein is a virally evolved STAT1 inhibitor that specifically targets STAT1 for proteasomal degradation. Using this in vitro model, we have shown that major histocompatibility complex (MHC) class I and class 11 molecules are downregulated at the cell surface following a reduction in STAT1 protein expression. With regards to MHC class 1, the impairment of the antigen processing machinery renders the cells less recognized by the host EBV-specific immunosurveillance. In addition, downregulation of STAT1 increases the expression of LMP2A and lytic cycle antigens and results in a higher proportion of cells entering the lytic cycle. These results suggest that STAT1 is involved in maintaining the latency III viral program observed in transformed B cells and regulating immunorecognition by EBV-specific T cells.