DNA-methyltransferase inhibitors (DNMTis), such as decitabine, are used clinically to treat myelodysplastic syndrome (MDS) and acute myeloid leukemia (AML). Decitabine activates the transcription of endogenous retroviruses (ERVs), which can induce immune response by acting as cellular double-stranded RNAs (dsRNAs). Here, we find that the viral mimicry and subsequent cell death in response to decitabine requires dsRNA-binding protein Staufen1 (Stau1). We show that Stau1 directly binds to ERV RNAs in a genome-wide manner and stabilizes them. Furthermore, Stau1-mediated stabilization requires a long non-coding RNA TINCR, which enhances the interaction between Stau1 and ERV RNAs. Analysis of a clinical patient cohort reveals that MDS/AML patients with lower Stau1 and TINCR expressions exhibit inferior treatment outcomes to DNMTi therapy. Overall, our study reveals the post-transcriptional regulatory mechanism of ERVs and identifies Stau1-TINCR complex as a potential target for predicting the efficacy of DNMTis and other drugs that rely on dsRNAs.