Infectious bronchitis virus (IBV) is the only coronavirus known to infect poultry. The replication and pathogenesis of IBV are poorly understood, mainly because of the unavailability of a robust cell culture system. Here, we report that an active ubiquitin proteasome system (UPS) is necessary for efficient replication of IBV in Vero cells. Synthesis of IBV-specific RNA as well as viral protein is hampered in the presence of chemical inhibitors specific for the UPS. Like other coronaviruses, IBV encodes a papain-like protease (PLpro) that exhibits in vitro deubiquitinase activity in addition to proteolytically processing the replicase polyprotein. Our results show that the IBV PLpro enzyme inhibits the synthesis of interferon beta (IFNβ) in infected chicken embryonic fibroblast (DF-1) cells and that this activity is enhanced in the presence of melanoma differentiation-associated protein 5 (MDA5) and TANK binding kinase 1 (TBK1). IBV PLpro, when overexpressed in DF-1 cells, deubiquitinates MDA5 and TBK1. Both of these proteins, along with other adapter molecules such as MAVS, IKKε, and IRF3, form a signaling cascade for the synthesis of IFNβ. Ubiquitination of MDA5 and TBK1 is essential for their activation, and their deubiquitination by IBV PLpro renders them unable to participate in antiviral signaling. This study shows for the first time that there is cross-talk between the UPS and the innate immune response during IBV infection and that the deubiquitinase activity of IBV PLpro is involved in its activity as an IFN antagonist. This insight will be useful for designing better antivirals targeting the catalytic activity of the IBV PLpro enzyme.