ISG15 (ISG15 ubiquitin-like modifier), a ubiquitin-like protein, is one of the major type I IFN (interferon) effector systems. ISG15 can be conjugated to target proteins (ISGylation) via the stepwise action of E1, E2, and E3 enzymes. Conjugated ISG15 can be removed (deISGylated) from target proteins by USP18 (ubiquitin-specific peptidase 18). Here we investigated the role of deISGylation by USP18 in regulating autophagy and EGFR degradation in cells treated with type I IFNs. We show that type I IFN induced expression of ISG15 leads to ISGylation of BECN1 at Lys117, as well as Lys263, Lys265, and Lys266 which competes with Lys63 ubiquitination of BECN1. We demonstrate that ISGylation of BECN1 at Lys117, as well as Lys263, Lys265, and Lys266 serve an important role in negative regulation of intracellular processes including autophagy and EGFR degradation that are critically dependent upon the activity of class III PtdIns 3-kinase. Our studies provide fundamental new mechanistic insights into the innate immunity response implemented by type I IFNs.