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The N-terminal domains of the NS1 protein of influenza B virus (NS1B protein) and the NS1 protein of influenza A virus (NS1A protein) share one function: binding double-stranded RNA (dsRNA). Here we show that the N-terminal domain of the NS1B protein possesses an additional function that is not shared by its NS1A counterpart: binding the ubiquitin-like ISG15 protein that is induced by influenza B virus infection. Homology modeling predicts that the dimeric six-helical N-terminal domain of the NS1B protein differs from its NS1A protein counterpart in containing large loops between helices 1 and 2 (loops 1 and 1′) and between helices 2 and 3 (loops 2 and 2′). Mutagenesis establishes that residues located in loop 1/1′ together with residues located in polypeptide segment 94–103 form the ISG15 protein-binding site of NS1B protein. Loop 1/1′ is not required for dsRNA binding, which instead requires …