The murine γ-herpesvirus-68 (MHV-68) K3 protein, like that of the Kaposi's sarcoma-associated herpesvirus, down-regulates major histocompatibility complex (MHC) class I expression. However, how this contributes to viral replication in vivo is unclear. After intranasal MHV-68 infection, K3 was transcribed both during acute lytic infection in the lung and during latency establishment in lymphoid tissue. K3-deficient viruses were not cleared more rapidly from the lung, but the number of latently infected spleen cells was reduced and the frequency of virus-specific CD8+ cytotoxic T lymphocytes (CTLs) was increased. CTL depletion reversed the viral latency deficit. Thus, a major function of K3 appears to be CTL evasion during viral latency expansion.