The Nipah virus (NiV) phosphoprotein (P) gene encodes the C, P, V, and W proteins. P, V, and W, have in common an amino-terminal domain sufficient to bind STAT1, inhibiting its interferon (IFN)-induced tyrosine phosphorylation. P is also essential for RNA-dependent RNA polymerase function. C is encoded by an alternate open reading frame (ORF) within the common amino-terminal domain. Mutations within residues 81 to 113 of P impaired its polymerase cofactor function, as assessed by a minireplicon assay, but these mutants retained STAT1 inhibitory function. Mutations within the residue 114 to 140 region were identified that abrogated interaction with and inhibition of STAT1 by P, V, and W without disrupting P polymerase cofactor function. Recombinant NiVs were then generated. A G121E mutation, which abrogated inhibition of STAT1, was introduced into a C protein knockout background (Cko) because the mutation would otherwise also alter the overlapping C ORF. In cell culture, relative to the wild-type virus, the Cko mutation proved attenuating but the G121E mutant virus replicated identically to the Cko virus. In cells infected with the wild-type and Cko viruses, STAT1 was nuclear despite the absence of tyrosine phosphorylation. This latter observation mirrors what has been seen in cells expressing NiV W. In the G121E mutant virus-infected cells, STAT1 was not phosphorylated and was cytoplasmic in the absence of IFN stimulation but became tyrosine phosphorylated and nuclear following IFN addition. These data demonstrate that the gene for NiV P encodes functions that sequester inactive STAT1 in the nucleus, preventing its activation and suggest that the W protein is the dominant inhibitor of STAT1 in NiV-infected cells.