Etanercept is a soluble form of the tumor necrosis factor receptor 2 (TNFR2) that inhibits pathological tumor necrosis factor (TNF) responses in rheumatoid arthritis and other inflammatory diseases. However, besides TNF, etanercept also blocks lymphotoxin-α (LTα), which has no clear therapeutic value and might aggravate some of the adverse effects associated with etanercept. Poxviruses encode soluble TNFR2 homologs, termed viral TNF decoy receptors (vTNFRs), that display unique specificity properties. For instance, cytokine response modifier D (CrmD) inhibits mouse and human TNF and mouse LTα, but it is inactive against human LTα. Here, we analyzed the molecular basis of these immunomodulatory activities in the ectromelia virus–encoded CrmD. We found that the overall molecular mechanism to bind TNF and LTα from mouse and human origin is fairly conserved in CrmD and dominated by a groove under its 50s loop. However, other ligand-specific binding determinants optimize CrmD for the inhibition of mouse ligands, especially mouse TNF. Moreover, we show that the inability of CrmD to inhibit human LTα is caused by a Glu-Phe-Glu motif in its 90s loop. Importantly, transfer of this motif to etanercept diminished its anti-LTα activity in >60-fold while weakening its TNF-inhibitory capacity in 3-fold. This new etanercept variant could potentially be used in the clinic as a safer alternative to conventional etanercept. This work is the most detailed study of the vTNFR–ligand interactions to date and illustrates that a better knowledge of vTNFRs can provide valuable information to improve current anti-TNF therapies.