Abstract Type I IFNs play central roles in innate immunity; however, overproduction of IFN can lead to immunopathology. In this study, we demonstrate that adenosine deaminase acting on RNA 1 (ADAR1), an RNA-editing enzyme induced by IFN, is essential for cells to avoid inappropriate sensing of cytosolic RNA in an inducible knockout cell model—the primary mouse embryo fibroblast derived from ADAR1 lox/lox and Cre-ER mice as well as in HEK293 cells. ADAR1 suppresses viral and cellular RNA detection by retinoic acid–inducible gene I (RIG-I) through its RNA binding rather than its RNA editing activity. dsRNA binds to both ADAR1 and RIG-I, but ADAR1 reduces RIG-I RNA binding. In the absence of ADAR1, cellular RNA stimulates type I IFN production without viral infection or exogenous RNA stimulation. Moreover, we showed in the ADAR1-inducible knockout mice that ADAR1 gene disruption results in high-level IFN production in neuronal tissues—the hallmark of Aicardi–Goutières syndrome, a heritable autoimmune disease recently found to be associated with ADAR1 gene mutations. In summary, this study found that ADAR1 limits cytosolic RNA sensing by RIG-I through its RNA binding activity; therefore, ADAR1 suppresses type I IFN production stimulated by viral and cellular RNAs. These results explain why loss of ADARA1 causes IFN induction and also indicates a mechanism for the involvement of ADAR1 in autoimmune diseases such as Aicardi–Goutières syndrome.