Background Alloferon, an immunomodulatory peptide, has antiviral capability against herpesvirus. In this research, we aimed to investigate the effect of alloferon on the regulation of the life cycle of Kaposi's sarcoma-associated herpesvirus (KSHV), and its mechanisms. We also assessed the antiviral activity of alloferon on natural killer (NK) cells as an early antiviral immune responder. Methods We first examined the change in cell proliferation and the expression of the viral genes in a KSHV- infected cell line, body-cavity-based B lymphoma (BCBL)-1, under the lytic cycle by 12- O-tetradecanoyl-phorbol-13-acetate (TPA) treatment. To elucidate the antiviral mechanism of alloferon, we tested calcium influx and the activation of the extracellular signal-regulated kinase (ERK) pathway. Furthermore, we evaluated the cytotoxicity of NK cells against BCBL-1 by alloferon. Results Alloferon effectively recovered the suppressed proliferation of BCBL-1 by TPA, which was achieved by the down-regulation of lytic-cycle-related viral genes, RTA, K8 and vIRF2. To clarify the signal transduction pathways related to the regulation of the viral genes by alloferon, we confirmed that the calcium influx into BCBL-1 was apparently inhibited by alloferon, which preceded the suppression of the phosphorylation of ERK and the activation of AP-1 by TPA. Moreover, when NK cells were exposed to alloferon, their cytolytic activity was improved, and this was mediated by the enhancement of perforin/granzyme secretion. Conclusions The results of this study suggest that alloferon can be used as an effective antiviral agent for the regulation of the KSHV life cycle by the down-regulation of AP-1 activity and for the the enhancement of antiviral immunity by up-regulation of NK cell cytotoxicity.