RNA-modulating factors not only regulate multiple steps of cellular RNA metabolism, but also emerge as key effectors of the immune response against invading viral pathogens including human immunodeficiency virus type-1 (HIV-1). However, the cellular RNA-binding proteins involved in the establishment and maintenance of latent HIV-1 reservoirs have not been extensively studied. Here, we screened a panel of 62 cellular RNA-binding proteins and identified NEDD4-binding protein 1 (N4BP1) as a potent interferon-inducible inhibitor of HIV-1 in primary T cells and macrophages. N4BP1 harbours a prototypical PilT N terminus-like RNase domain and inhibits HIV-1 replication by interacting with and degrading viral mRNA species. Following activation of CD4 T cells, however, N4BP1 undergoes rapid cleavage at Arg 509 by the paracaspase named mucosa-associated lymphoid tissue lymphoma translocation 1 (MALT1). Mutational analyses and knockout studies revealed that MALT1-mediated inactivation of N4BP1 facilitates the reactivation of latent HIV-1 proviruses. Taken together, our findings demonstrate that the RNase N4BP1 is an efficient restriction factor of HIV-1 and suggest that inactivation of N4BP1 by induction of MALT1 activation might facilitate elimination of latent HIV-1 reservoirs.