Herpesviral infection reflects thousands of years of co-evolution and the constant struggle between virus and host for control of cellular gene expression. During Kaposi's sarcoma-associated herpesvirus (KSHV) lytic replication, the virus rapidly seizes control of host gene expression machinery by triggering a massive RNA decay event via a virally-encoded endoribonuclease, SOX. This virus takeover strategy decimates close to 80% of cellular transcripts, reallocating host resources toward viral replication. The host cell, however, is not entirely passive in this assault on RNA stability. A small pool of host transcripts that actively evade SOX cleavage has been identified over the years. One such "escapee", C19ORF66 (herein referred to as Shiftless - SHFL) encodes a potent anti-viral protein capable of restricting the replication of multiple DNA, RNA, and retroviruses including KSHV. Here, we show that SHFL restricts KSHV replication by targeting the expression of critical viral early genes, including the master transactivator protein, KSHV ORF50, and thus subsequently the entire lytic gene cascade. Consistent with previous reports, we found the SHFL interactome throughout KSHV infection is dominated by RNA-binding proteins that influence both translation and protein stability, including the viral protein ORF57, a crucial regulator of viral RNA fate. We next show that SHFL affects cytoplasmic RNA granule formation, triggering the disassembly of processing bodies. Taken together, our findings provide insights into the complex relationship between RNA stability, RNA granule formation, and the anti-viral response to KSHV infection.