Human herpesvirus 8 (HHV-8), associated with Kaposi sarcoma, primary effusion lymphoma (PEL), and multicentric Castleman disease, encodes four interferon regulatory factor homologs, vIRFs 1-4, that interact with and inhibit various mediators of host-cell defense against virus infection. A cellular protein targeted by all the vIRFs is ubiquitin-specific protease 7 (USP7); while replication-modulatory and latently infected PEL-cell pro-viability phenotypes of USP7 targeting have been identified for vIRFs 1-3, the significance of the interaction of vIRF-4 with USP7 has remained undetermined. Here we show, through genetic ablation of the vIRF-4-USP7 interaction in infected cells, that vIRF-4 association with USP7 is necessary for optimal expression of vIRF-4 and normal HHV-8 replication. Findings from experiments on transfected and infected cells identified ubiquitination of vIRF-4 via K48-linkage and USP7-binding-associated suppression of vIRF-4 ubiquitination and, in infected cells, increased vIRF-4 expression. Analysis of IFN-I induction and associated signaling as a function of vIRF-4 and its interaction with USP7 identified a role of each in innate-immune suppression. Finally, activation via K63-polyubiquitination of the innate-immune signaling mediator TRAF3 was found to be suppressed by vIRF-4 in a USP7-binding-associated manner in infected cells, but not in transfected cells, likely via binding-regulated expression of vIRF-4. Together, our data identify the first examples of vIRF ubiquitination and a vIRF substrate of USP7, enhanced expression of vIRF-4 via its interaction with USP7, and TRAF3-inhibitory activity of vIRF-4. The findings address, for the first time, the biological significance of the interaction of vIRF-4 with USP7 and reveal a mechanism of vIRF-4-mediated innate-immune evasion and pro-replication activity via TRAF3 regulation. IMPORTANCE HHV-8 homologs of cellular interferon regulatory factors (IRFs), involved in host-cell defense against virus infection, interact in an inhibitory fashion with IRFs and other mediators of antiviral innate immunity. These interactions are of demonstrated or hypothesized importance for successful primary, productive (lytic), and latent (persistent) infection by HHV-8. While HHV-8 vIRF-4 is known to interact physically with USP7 deubiquitinase, a key regulator of various cellular proteins, the functional and biological significance of the interaction has not been addressed. The present study identifies the interaction as important for HHV-8 productive replication and, indeed, for vIRF-4 expression and reveals a new function of vIRF-4 via inhibition of the activity of TRAF3, a pivotal mediator of host-cell antiviral activity through activation of cellular IRFs and induction of type-I interferons. These findings identify potential targets for the development of novel anti-HHV-8 agents, such as those able to disrupt vIRF-4-USP7 interaction or vIRF-4-stabilizing USP7 activity.