Innate immune responses are crucial for limiting virus infection. However, viruses often hijack our best defenses for viral objectives. Human Cytomegalovirus (HCMV) is a beta herpesvirus which establishes a life-long latent infection. Defining the virus-host interactions controlling latency and reactivation is vital to the control of viral disease risk posed by virus reactivation. We defined an interaction between UL138, a pro-latency HCMV gene, and the host deubiquitinating complex, UAF1-USP1. UAF1 is a scaffold protein pivotal for the activity of ubiquitin specific peptidases (USP), including USP1. UAF1-USP1 sustains an innate immune response through the phosphorylation and activation of signal transducer and activator of transcription-1 (pSTAT1), as well as regulates the DNA damage response. After the onset of viral DNA synthesis, pSTAT1 levels are elevated in infection and this depends upon UL138 and USP1. pSTAT1 localizes to viral centers of replication, binds to the viral genome, and influences UL138 expression. Inhibition of USP1 results in a failure to establish latency, marked by increased viral genome replication and production of viral progeny. Inhibition of Jak-STAT signaling also results in increased viral genome synthesis in hematopoietic cells, consistent with a role for USP1-mediated regulation of STAT1 signaling in the establishment of latency. These findings demonstrate the importance of the UL138-UAF1-USP1 virus-host interaction in regulating HCMV latency establishment through the control of innate immune signaling. It will be important going forward to distinguish roles of UAF1-USP1 in regulating pSTAT1 relative to its role in the DNA damage response in HCMV infection.