The epithelial surface is often proposed to actively participate in host defense, but evidence that this is the case remains circumstantial. Similarly, respiratory paramyxoviral infections are a leading cause of serious respiratory disease, but the basis for host defense against severe illness is uncertain. Here we use a common mouse paramyxovirus (Sendai virus) to show that a prominent early event in respiratory paramyxoviral infection is activation of the IFN-signaling protein Stat1 in airway epithelial cells. Furthermore, Stat1-/- mice developed illness that resembled severe paramyxoviral respiratory infection in humans and was characterized by increased viral replication and neutrophilic inflammation in concert with overproduction of TNF-alpha and neutrophil chemokine CXCL2. Poor control of viral replication as well as TNF-alpha and CXCL2 overproduction were both mimicked by infection of Stat1-/- airway epithelial cells in culture. TNF-alpha drives the CXCL2 response, because it can be reversed by TNF-alpha blockade in vitro and in vivo. These findings pointed to an epithelial defect in Stat1-/- mice. Indeed, we next demonstrated that Stat1-/- mice that were reconstituted with wild-type bone marrow were still susceptible to infection with Sendai virus, whereas wild-type mice that received Stat1-/- bone marrow retained resistance to infection. The susceptible epithelial Stat1-/- chimeric mice also exhibited increased viral replication as well as excessive neutrophils, CXCL2, and TNF-alpha in the airspace. These findings provide some of the most definitive evidence to date for the critical role of barrier epithelial cells in innate immunity to common pathogens, particularly in controlling viral replication.