Prototype foamy virus (PFV), a complex retrovirus belonging to Spumaretrovirinae, maintains lifelong latent infection. The maintenance of lifelong latent infection by viruses relies on the repression of the type I interferon (IFN) response. However, the mechanism involving PFV latency, especially regarding the suppression of the IFN response, is poorly understood. Our previous study showed that PFV promotes autophagic flux. However, the underlying mechanism and the role of PFV-induced autophagy in latent infection have not been clarified. Here, we report that the PFV viral structural protein Gag induced amphisome formation and triggered autophagic clearance of stress granules (SGs) to attenuate type I IFN production. Moreover, the late domain (L-domain) of Gag played a central role in Alix recruitment, which promoted endosomal sorting complex required for transport I (ESCRT-I) formation and amphisome accumulation by facilitating late endosome formation. Our data suggest that PFV Gag represses the host IFN response through autophagic clearance of SGs by activating the endosome-autophagy pathway. More importantly, we found a novel mechanism by which a retrovirus inhibits the SG response to repress the type I IFN response.IMPORTANCE Maintenance of lifelong latent infection for viruses relies on repression of the type I IFN response. Autophagy plays a double-edged sword in antiviral immunity. However, the role of autophagy in the regulation of the type I IFN response and the mechanism involving virus-promoted autophagy have not been fully elucidated. SGs are an immune complex associated with the antiviral immune response and are critical for type I IFN production. Autophagic clearance of SGs is one means of degradation of SGs and is associated with regulation of immunity, but the detailed mechanism remains unclear. In this article, we demonstrate that PFV Gag recruits ESCRT-I to facilitate amphisome formation. Our data also suggest that amphisome formation is a critical event for autophagic clearance of SGs and repression of the type I IFN response. More importantly, we found a novel mechanism by which a retrovirus inhibits the SG response to repress the type I IFN response.