Viral RNA-host protein interactions are critical for replication of flaviviruses, a genus of positive-strand RNA viruses comprising major vector-borne human pathogens including dengue viruses (DENV). We examined three conserved host RNA-binding proteins (RBPs) G3BP1, G3BP2 and CAPRIN1 in dengue virus (DENV-2) infection and found them to be novel regulators of the interferon (IFN) response against DENV-2. The three RBPs were required for the accumulation of the protein products of several interferon stimulated genes (ISGs), and for efficient translation of PKR and IFITM2 mRNAs. This identifies G3BP1, G3BP2 and CAPRIN1 as novel regulators of the antiviral state. Their antiviral activity was antagonized by the abundant DENV-2 non-coding subgenomic flaviviral RNA (sfRNA), which bound to G3BP1, G3BP2 and CAPRIN1, inhibited their activity and lead to profound inhibition of ISG mRNA translation. This work describes a new and unexpected level of regulation for interferon stimulated gene expression and presents the first mechanism of action for an sfRNA as a molecular sponge of anti-viral effectors in human cells.