Vaccinia virus devoid of its E3L gene is sensitive to treatment of RK-13 cells with interferon-alpha and fails to replicate or form plaques in HeLa cells. In order to determine function of the E3L gene, vaccinia virus recombinants were constructed by inserting mutant E3L genes or a gene coding for an alternative dsRNA-binding protein into virus deleted of its wild type E3L gene. Those viruses that expressed proteins that retained dsRNA binding activity were resistant to the effects of interferon in RK-13 cells and could replicate in HeLa cells. Recombinant viruses that expressed E3L mutant proteins which were unable to bind to dsRNA were interferon sensitive in RK-13 cells and could not replicate in HeLa cells. In addition, a virus that expressed a mutant E3L protein previously characterized as having a low binding affinity for dsRNA exhibited an intermediate phenotype: it was interferon resistant in RK-13 cells but could not replicate in HeLa cells. This work suggests that the E3L gene of vaccinia virus functions primarily as a dsRNA-binding protein in allowing resistance to interferon and in promoting replication in HeLa cells.