The importance of natural killer (NK) cells in the early immune response to viral or bacterial infection is well known. However, the phenotype, function, and physiologic role of NK cells during the late stage of persistent viral infection have not been extensively studied. Here, we characterized NK cells in mice persistently infected with lymphocytic choriomeningitis virus clone 13 and showed that in contrast to NK cells from acutely infected or uninfected mice, NK cells from chronically infected mice expressed a terminally differentiated phenotype, stronger cytotoxicity, and reduced inhibitory receptor expression. In an in vivo tumor model, chronically infected mice exhibited significantly delayed tumor progression in an NK cell-dependent manner. NK cells from chronically infected mice also expressed high STAT1, and blocking the type I interferon (IFN) receptor revealed that type I IFN signaling directly regulated NK cell cytotoxicity. Our findings indicate that sustained type I IFN signaling during chronic viral infection potentiates the cytolytic function of NK cells and contributes to NK cell-dependent host immune surveillance.