Ebola virus budding is mediated by the VP40 matrix protein. VP40 can bud from mammalian cells independent of other viral proteins, and efficient release of VP40 virus-like particles (VLPs) requires interactions with host proteins such as tsg101 and Nedd4, an E3 ubiquitin ligase. Ubiquitin itself is thought to be exploited by Ebola virus to facilitate efficient virus egress. Disruption of VP40 function and thus virus budding remains an attractive target for the development of novel antiviral therapies. Here, we investigate the effect of ISG15 protein on the release of Ebola VP40 VLPs. ISG15 is an IFN-inducible, ubiquitin-like protein expressed after bacterial or viral infection. Our results show that expression of free ISG15, or the ISGylation system (UbE1L and UbcH8), inhibits budding of Ebola virus VP40 VLPs. Addressing the molecular mechanism of this inhibition, we show that ISG15 interacts with Nedd4 ubiquitin ligase and inhibits ubiquitination of VP40. Furthermore, the L-domain deletion mutant of VP40 (ΔPT/PY), which does not interact with Nedd4, was insensitive to ISG15-mediated inhibition of VLP release. These data provide evidence of antiviral activity of ISG15 against Ebola virus and suggest a mechanism of action involving disruption of Nedd4 function and subsequent ubiquitination of VP40.