Molluscum contagiosum virus (MCV) is a dermatotropic poxvirus that causes benign skin lesions. MCV lesions persist because of virally encoded immune evasion molecules that inhibit antiviral responses. The MCV MC159 protein suppresses NF-B activation, a powerful antiviral response, via interactions with the NF-B essential modulator (NEMO) subunit of the IB kinase (IKK) complex. Binding of MC159 to NEMO does not disrupt the IKK complex, implying that MC159 prevents IKK activation via an as-yet-unidentified strategy. Here, we demonstrated that MC159 inhibited NEMO polyubiquitination, a posttranslational modification required for IKK and downstream NF-B activation. Because MCV cannot be propagated in cell culture, MC159 was expressed independent of infection or during a surrogate vaccinia virus infection to identify how MC159 prevented polyubiquitination. Cellular inhibitor of apoptosis protein 1 (cIAP1) is a cellular E3 ligase that ubiquitinates NEMO. Mutational analyses revealed that MC159 and cIAP1 each bind to the same NEMO region, suggesting that MC159 may competitively inhibit cIAP1-NEMO interactions. Indeed, MC159 prevented cIAP1-NEMO interactions. MC159 also diminished cIAP1-mediated NEMO polyubiquitination and cIAP1-induced NF-B activation. These data suggest that MC159 competitively binds to NEMO to prevent cIAP1-induced NEMO polyubiquitination. To our knowledge, this is the first report of a viral protein disrupting NEMO-cIAP1 interactions to strategically suppress IKK activation. All viruses must antagonize antiviral signaling events for survival. We hypothesize that MC159 inhibits NEMO polyubiquitination as a clever strategy to manipulate the host cell environment to the benefit of the virus. IMPORTANCE Molluscum contagiosum virus (MCV) is a human-specific poxvirus that causes persistent skin neoplasms. The persistence of MCV has been attributed to viral downregulation of host cell immune responses such as NF-B activation. We show here that the MCV MC159 protein interacts with the NEMO subunit of the IKK complex to prevent NEMO interactions with the cIAP1 E3 ubiquitin ligase. This interaction correlates with a dampening of cIAP1 to polyubiquitinate NEMO and to activate NF-B. This inhibition of cIAP1-NEMO interactions is a new viral strategy to minimize IKK activation and to control NEMO polyubiquitination. This research provides new insights into mechanisms that persistent viruses may use to cause long-term infection of host cells.