Modified vaccinia virus Ankara (MVA) is an approved smallpox vaccine and a promising vaccine vector for other pathogens as well as for cancer therapeutics with more than 200 current or completed clinical trials. MVA was derived by passaging the parental Ankara vaccine virus hundreds of times in chick embryo fibroblasts during which it lost the ability to replicate in human and most other mammalian cells. Although this replication deficiency is an important safety feature, the genetic basis of the host restriction is not understood. Here, an unbiased human genome-wide RNAi screen in human A549 cells revealed that the zincfinger antiviral protein (ZAP), previously shown to inhibit certain RNA viruses, is a host restriction factor for MVA, a DNA virus. Additional studies demonstrated enhanced MVA replication in several human cell lines following knockdown of ZAP. Furthermore, CRISPR-Cas9 knockout of ZAP in human A549 cells increased MVA replication and spread by more than one log but had no effect on a non-attenuated strain of vaccinia virus. The intact viral C16 protein, which had been disrupted in MVA, antagonized ZAP by binding and sequestering the protein in cytoplasmic punctate structures. Studies aimed at exploring the mechanism by which ZAP restricts MVA replication in the absence of C16 showed that knockout of ZAP had no discernible effect on viral DNA or individual mRNA or protein species as determined by droplet digital polymerase chain reaction, deep RNA sequencing and mass spectrometry, respectively. Instead, inactivation of ZAP reduced the number of aberrant, dense, spherical particles that typically form in MVA-infected human cells, suggesting that ZAP has a novel role in interfering with a late step in the assembly of infectious MVA virions in the absence of the C16 protein.