Acts as a signaling pathway regulator involved in innate immune system response (PubMed:29350881). In response to interferon IFN-alpha, associates in a complex with transcriptional regulator NMI to regulate immune response; the complex formation prevents proteasome-mediated degradation of IFI35 and correlates with IFI35 dephosphorylation (By similarity). In complex with NMI, inhibits virus-triggered type I interferon/IFN-beta production (By similarity). In complex with NMI, negatively regulates nuclear factor NF-kappa-B signaling by inhibiting the nuclear translocation, activation and transcription of the NF-kappa-B subunit p65/RELA, resulting in the inhibition of endothelial cell proliferation, migration and re-endothelialization of injured arteries (PubMed:29350881). Beside its role as an intracellular signaling pathway regulator, also functions extracellularly as damage-associated molecular patterns (DAMPs) to promote inflammation when actively released by macrophage to the extracellular space during cell injury and pathogen invasion (By similarity). Macrophage-secreted IFI35 activates NF-kappa-B signaling in adjacent macrophages through Toll-like receptor 4/TLR4 activation, thereby inducing NF-kappa-B translocation from the cytoplasm into the nucleus which promotes the release of pro-inflammatory cytokines (By similarity). Homodimer. Also interacts with B-ATF. Interacts with TRIM21. Interacts (via NID domains) with NMI (via NID domains); the interaction is direct and is facilitated by TRIM21. Cytoplasmic IFI35 localizes in punctate granular structures (By similarity). Nuclear localization increased following IFN-alpha treatment (By similarity). Extracelullar following secretion by macrophage (By similarity). The NID domain 1 is involved in the negative regulation of p65/RELA transcription and the negative regulation of NF-kappa-B pathway activation. Phosphorylated. Dephosphorylation correlates with the formation of a complex with NMI. Knockout mice show decreased inflammatory response when exposed to infection or injury, which can lead to lower inflammation-induced mortality. Belongs to the NMI family.