Cystatins are natural inhibitors of lysosomal cysteine proteases, including cathepsins B, L, H, and S. Cystatin C (CSTC) is a member of the type 2 cystatin family and is an essential biomarker in the prognosis of several diseases. Emerging evidence suggests the immune regulatory roles of CSTC in antigen presentation, the release of different inflammatory mediators, and apoptosis in various pathophysiologies. In this study, the 390-bp cystatin C (HaCSTC) cDNA from big-belly seahorse (Hippocampus abdominalis) was cloned and characterized by screening the pre-established cDNA library. Based on similarities in sequence, HaCSTC is a homolog of the teleost type 2 cystatin family with putative catalytic cystatin domains, signal peptides, and disulfide bonds. HaCSTC transcripts were ubiquitously expressed in all tested big-belly seahorse tissues, with the highest expression in ovaries. Immune challenge with lipopolysaccharides, polyinosinic:polycytidylic acid, Edwardsiella tarda, and Streptococcus iniae caused significant upregulation in HaCSTC transcript levels. Using a pMAL-c5X expression vector, the 14.29-kDa protein of recombinant HaCSTC (rHaCSTC) was expressed in Escherichia coli BL21 (DE3), and its protease inhibitory activity against papain cysteine protease was determined with the aid of a protease substrate. Papain was competitively blocked by rHaCSTC in a dose-dependent manner. In response to viral hemorrhagic septicemia virus (VHSV) infection, HaCSTC overexpression strongly decreased the expression of VHSV transcripts, pro-inflammatory cytokines, and pro-apoptotic genes; while increasing the expression of anti-apoptotic genes in fathead minnow (FHM) cells. Furthermore, HaCSTC overexpression protected VHSV-infected FHM cells against VHSV-induced apoptosis and increased cell viability. Our findings imply the profound role of HaCSTC against pathogen infections by modulating fish immune responses.