In vertebrates, the presence of viral RNA in the cytosol is sensed by members of the RIG‐I‐like receptor (RLR) family, which signal to induce production of type I interferons (IFN). These key antiviral cytokines act in a paracrine and autocrine manner to induce hundreds of interferon‐stimulated genes (ISGs), whose protein products restrict viral entry, replication and budding. ISGs include the RLRs themselves: RIG‐I, MDA5 and, the least‐studied family member, LGP2. In contrast, the IFN system is absent in plants and invertebrates, which defend themselves from viral intruders using RNA interference (RNAi). In RNAi, the endoribonuclease Dicer cleaves virus‐derived double‐stranded RNA (dsRNA) into small interfering RNAs (siRNAs) that target complementary viral RNA for cleavage. Interestingly, the RNAi machinery is conserved in mammals, and we have recently demonstrated that it is able to participate in mammalian antiviral defence in conditions in which the IFN system is suppressed. In contrast, when the IFN system is active, one or more ISGs act to mask or suppress antiviral RNAi. Here, we demonstrate that LGP2 constitutes one of the ISGs that can inhibit antiviral RNAi in mammals. We show that LGP2 associates with Dicer and inhibits cleavage of dsRNA into siRNAs both in vitro and in cells. Further, we show that in differentiated cells lacking components of the IFN response, ectopic expression of LGP2 interferes with RNAi‐dependent suppression of gene expression. Conversely, genetic loss of LGP2 uncovers dsRNA‐mediated RNAi albeit less strongly than complete loss of the IFN system. Thus, the inefficiency of RNAi as a mechanism of antiviral defence in mammalian somatic cells can be in part attributed to Dicer inhibition by LGP2 induced by type I IFNs. LGP2‐mediated antagonism of dsRNA‐mediated RNAi may help ensure that viral dsRNA substrates are preserved in order to serve as targets of antiviral ISG proteins.