Human metapneumovirus (hMPV), a leading cause of respiratory tract infections in infants, encodes a small hydrophobic (SH) protein of unknown function. Here we show that infection of plasmacytoid dendritic cells (pDCs) with a recombinant virus lacking SH expression (rhMPV-ΔSH) enhanced the secretion of type I interferons (IFNs), which required TLR7 and MyD88 expression. HMPV SH protein inhibited TLR7/MyD88/TRAF6 signaling leading to IFN gene transcription, identifying a novel mechanism by which paramyxovirus SH proteins modulate innate immune responses.