RIG-I is a key cytosolic RNA sensor that mediates innate immune defense against RNA virus. Aberrant RIG-I activity leads to severe pathological states such as autosomal dominant multi-system disorder, inflammatory myophathies and dermatomyositis. Therefore, identification of regulators that ensure efficient defense without harmful immune-pathology is particularly critical to deal with RIG-I-associated diseases. Here, we presented the inflammatory inducible FAT10 as a novel negative regulator of RIG-I-mediated inflammatory response. In various cell lines, FAT10 protein is undetectable unless it is induced by pro-inflammatory cytokines. FAT10 non-covalently associated with the 2CARD domain of RIG-I, and inhibited viral RNA-induced IRF3 and NF-kB activation through modulating the RIG-I protein solubility. We further demonstrated that FAT10 was recruited to RIG-I-TRIM25 to form an inhibitory complex where FAT10 was stabilized by E3 ligase TRIM25. As the result, FAT10 inhibited the antiviral stress granules formation contains RIG-I and sequestered the active RIG-I away from the mitochondria. Our study presented a novel mechanism to dampen RIG-I activity. Highly accumulated FAT10 is observed in various cancers with pro-inflammatory environment, therefore, our finding which uncovered the suppressive effect of the accumulated FAT10 during virus-mediated inflammatory response may also provide molecular clue to understand the carcinogenesis related with infection and inflammation.