ISG15 is an interferon-stimulated, ubiquitin-like protein that can conjugate to substrate proteins (ISGylation) to counteract microbial infection, but the underlying mechanisms remain elusive. Here, we used a viral-like particle trapping technology to identify ISG15-binding proteins and discovered Ring Finger Protein 213 (RNF213) as an ISG15 interactor and cellular sensor of ISGylated proteins. RNF213 is a poorly-characterized, interferon-induced megaprotein that is frequently mutated in Moyamoya disease, a rare cerebrovascular disorder. We found that interferon induces ISGylation and oligomerization of RNF213 on lipid droplets, where it acts as a sensor for ISGylated proteins. We showed that RNF213 has broad antimicrobial activity in vitro and in vivo, counteracting infection with Listeria monocytogenes, herpes simplex virus 1 (HSV-1), human respiratory syncytial virus (RSV) and coxsackievirus B3 (CVB3), and we observed a striking co-localization of RNF213 with intracellular bacteria. Together, our findings provide novel molecular insights into the ISGylation pathway and reveal RNF213 as a key antimicrobial effector.