Interferon-stimulated gene 15 (ISG15) is strongly upregulated during viral infections and exerts pro-viral or antiviral actions. While many viruses combat host antiviral defenses by limiting ISG expression, PRV infection notably increases expression of ISG15. However, studies on the viral strategies to regulate ISG15-mediated antiviral responses are limited. Here, we demonstrate that PRV-induced free ISG15 and conjugated proteins accumulation require viral gene expression. Conjugation inhibition assays showed that ISG15 imposes its antiviral effects via unconjugated (free) ISG15 and restricts the viral release. Knockout of ISG15 in PK15 cells interferes with IFN-beta production by blocking IRF3 activation and promotes PRV replication. Mechanistically, ISG15 facilitates IFN alpha-mediated antiviral activity against PRV by accelerating the activation and nuclear translocation of STAT1 and STAT2. Furthermore, ISG15 facilitated STAT1/STAT2/IRF9 (ISGF3) formation and ISGF3-induced IFN-stimulated response elements (ISRE) activity for efficient gene transcription by directly interacting with STAT2. Significantly, ISG15 knockout mice displayed enhanced susceptibility to PRV, as evidenced by increased mortality and viral loads, as well as more severe pathology caused by excessive production of the inflammatory cytokines. Our studies establish the importance of free ISG15 in IFN alpha-induced antiviral immunity and in the control of viral infections. Author summary By antagonizing type I IFN production and action, pseudorabies virus (PRV) evades host defense to establish persistent infection. Interferon-stimulated gene 15 (ISG15) is known to inhibit the replication of many viruses, although pro-viral effects of ISGylation are also reported. We previously found that ISG15 was strongly induced upon PRV infection, however, how ISG15 abundance is regulated and whether the ISG15 influences PRV replication via monomer or polypeptide remain unclear. This study shows that ISG15 restricts PRV growth dependent on free ISG15, moreover, free ISG15 positively regulated IFN alpha-mediated antiviral activity by facilitating activation and nuclear translocation of STAT1 and STAT2. Furthermore, ISG15 knockout mice display more highly sensitive to PRV, indicating that ISG15 may also have an antiviral function in vivo. This study highlights that free ISG15 is a critical antiviral target against PRV infection and improves our understanding of the host immune response to PRV infection.