Vaccinia E3 protein has the biochemical capacity of binding to double-stranded RNA (dsRNA). The best characterized biological functions of the E3 protein include its host range function, suppression of cytokine expression, and inhibition of interferon (IFN)-induced antiviral activity. Currently, the role of the dsRNA binding capacity in the biological functions of the E3 protein is not clear. To further understand the mechanism of the E3 protein biological functions, we performed alanine scanning of the entire dsRNA binding domain of the E3 protein to examine the link between its biochemical capacity of dsRNA binding and biological functions. Of the 115 mutants examined, 20 were defective in dsRNA binding. Although the majority of the mutants defective in dsRNA binding also showed defective replication in HeLa cells, nine mutants (I105A, Y125A, E138A, F148A, F159A, K171A, L182A, L183A, and I187/188A) retained the host range function to various degrees. Further examination of a set of representative E3L mutants showed that residues essential for dsRNA binding are not essential for the biological functions of E3 protein, such as inhibition of protein kinase R (PKR) activation, suppression of cytokine expression, and apoptosis. Thus, data described in this communication strongly indicate the E3 protein performs its biological functions via a novel mechanism which does not correlate with its dsRNA binding activity. IMPORTANCE: dsRNAs produced during virus replication are important pathogen-associated molecular patterns (PAMPs) for inducing antiviral immune responses. One of the strategies used by many viruses to counteract such antiviral immune responses is achieved by producing dsRNA binding proteins, such as poxvirus E3 family proteins, influenza virus NS1, and Ebola virus V35 proteins. The most widely accepted model for the biological functions of this class of viral dsRNA binding proteins is that they bind to and sequester viral dsRNA PAMPs; thus, they suppress the related antiviral immune responses. However, no direct experimental data confirm such a model. In this study of vaccinia E3 protein, we found that the biological functions of the E3 protein are not necessarily linked to its biochemical capacity of dsRNA binding. Thus, our data strongly point to a new concept of virus modulation of cellular antiviral responses triggered by dsRNA PAMPs.