The Type I Interferon family of cytokines all act through the same cell surface receptor and induce phosphorylation of the same subset of response regulators of the STAT family. Despite their shared receptor, different Type I Interferons have different functions during immune response to infection. In particular, they differ in the potency of their induced anti-viral and anti-proliferative responses in target cells. It remains not fully understood how these functional differences can arise in a ligand-specific manner both at the level of STAT phosphorylation and the downstream function. We use a minimal computational model of Type I Interferon signaling, focusing on Interferon-α and Interferon-β. We validate the model with quantitative experimental data to identify the key determinants of specificity and functional plasticity in Type I Interferon signaling. We investigate different mechanisms of signal discrimination, and how multiple system components such as binding affinity, receptor expression levels and their variability, receptor internalization, short-term negative feedback by SOCS1 protein, and differential receptor expression play together to ensure ligand specificity on the level of STAT phosphorylation. Based on these results, we propose phenomenological functional mappings from STAT activation to downstream anti-viral and anti-proliferative activity to investigate differential signal processing steps downstream of STAT phosphorylation. We find that the negative feedback by the protein USP18, which enhances differences in signaling between Interferons via ligand-dependent refractoriness, can give rise to functional plasticity in Interferon-α and Interferon-β signaling, and explore other factors that control functional plasticity. Beyond Type I Interferon signaling, our results have a broad applicability to questions of signaling specificity and functional plasticity in signaling systems with multiple ligands acting through a bottleneck of a small number of shared receptors.