Coronavirus express a multifunctional papain-like protease, termed PLP2. PLP2 acts as a protease that cleaves the viral replicase polyprotein, and a?deubiquitinating?(DUB) enzyme which removes ubiquitin moieties from ubiquitin-conjugated proteins. Previous?in vitrostudies implicated PLP2 DUB?activity?as a negative regulator of the host interferon (IFN) response, but the role of DUB?activity?during virus infection was unknown. Here, we used X-ray?structure-guided?mutagenesis?and functional studies to identify amino acid substitutions within the ubiquitin-binding surface of PLP2 that reduced DUB?activity?without affecting polyprotein processing?activity. We engineered a DUB mutation (Asp1772 to Ala) into a?murine?coronavirus?and evaluated the replication and?pathogenesis?of the DUB mutant virus (DUBmut) in cultured macrophages and in mice. We found that the DUBmut virus replicates similarly as the wild-type virus in cultured cells, but the DUBmut virus activates an IFN response at earlier times compared to the wild-type virus infection in macrophages, consistent with DUB?activity?negatively regulating the IFN response. We compared the?pathogenesis?of the DUBmut virus to the wild-type virus and found that the DUBmut-infected mice had a statistically significant reduction (p<0.05) in viral titer in livers and spleens at day 5 post-infection, albeit both wild-type and DUBmut virus infections resulted in similar liver pathology. Overall, this study demonstrates that?structure-guided?mutagenesisaids the identification of critical determinants of PLP2-ubiquitin complex, and that PLP2 DUB?activity?plays a role as an interferon antagonist in?coronavirus?pathogenesis.IMPORTANCE?Coronaviruses employ a genetic economy by encoding multifunctional proteins that function in viral replication and also modify the host environment to disarm the innate immune response. The?coronavirus?papain-like protease 2 (PLP2) domain possesses protease?activity, which cleaves the viral replicase polyprotein, and also DUB?activity?(de-conjugating ubiquitin/ubiquitin-like molecules from modified substrates) using identical catalytic residues. To separate the DUB?activity?from the protease?activity, we employed a?structure-guided?mutagenesis?approach and identified residues that are important for ubiquitin-binding. We found that mutating the ubiquitin-binding residues results in a PLP2 that has reduced DUB?activity?but retains protease?activity. We engineered a recombinant?murine?coronavirus?to express the DUB mutant and showed that the DUB mutant virus activated an earlier type I interferon response in macrophages and exhibited reduced replication in mice. The results of this study demonstrate that PLP2/DUB is an interferon antagonist and a virulence trait of coronaviruses.