MicroRNAs (miRNAs) are small (~22 nucleotides) noncoding RNAs which play an essential role in gene regulation and affect a wide range of processes, including development, differentiation, and oncogenesis. Here we report the identification of the first miRNA from an insect virus, derived from the major capsid protein (MCP) gene in Heliothis virescens ascovirus (HvAV) (HvAV-miR-1). Although MCP was abundantly expressed at all time points 24 h after infection, HvAV-miR-1 expression was strictly regulated and specifically detected from 96 h postinfection. HvAV-miR-1 expression coincided with a marked reduction of the expression of HvAV DNA polymerase I, which is a predicted target. Ectopic expression of full-length and truncated versions of MCP retaining the miRNA sequence significantly reduced DNA polymerase I transcript levels and inhibited viral replication. Our results indicate that HvAV-miR-1 directs transcriptional degradation of DNA polymerase I and regulates HvAV replication. These findings are congruent with recent reports that miR-BART-2 regulates Epstein-Barr virus DNA polymerase expression and suggest that virus-encoded miRNA regulation of virus replication may be a general phenomenon.