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Soluble cytokine decoy receptors are potent immune modulatory reagents with therapeutic applications. Some virus-encoded secreted cytokine receptors interact with glycosaminoglycans expressed at the cell surface, but the biological significance of this activity in vivo is poorly understood. Here, we show the type I interferon binding protein (IFNα/βBP) encoded by vaccinia and ectromelia viruses requires of this cell binding activity to confer full virulence to these viruses and to retain immunomodulatory activity. Expression of a variant form of the IFNα/βBP that inhibits IFN activity, but does not interact with cell surface glycosaminoglycans, results in highly attenuated viruses with a virulence similar to that of the IFNα/βBP deletion mutant viruses. Transcriptomics analysis and infection of IFN receptor-deficient mice confirmed that the control of IFN activity is the main function of the IFNα/βBP in vivo. We propose that retention of secreted cytokine receptors at the cell surface may largely enhance their immunomodulatory activity. Secreted cytokine decoy receptors encoded by viruses can act as potent immune evasion proteins modulating antiviral immunity. Here Hernaez et al. show that cell surface binding is required for efficient evasion of the host response by a secreted virus encoded type I IFN decoy receptor of vaccinia and ectromelia virus using an in vivo model of infection.