Interferon-induced transmembrane proteins (IFITMs) are S-palmitoylated proteins in vertebrates that restrict a diverse range of viruses. S-palmitoylated IFITM3 in particular engages incoming virus particles, prevents their cytoplasmic entry, and accelerates their lysosomal clearance by host cells. However, how S-palmitoylation modulates the structure and biophysical characteristics of IFITM3 to promote its antiviral activity remains unclear. To investigate how site-specific S-palmitoylation controls IFITM3 antiviral activity, we employed computational, chemical, and biophysical approaches to demonstrate that site-specific lipidation of cysteine 72 enhances the antiviral activity of IFITM3 by modulating its conformation and interaction with lipid membranes. Collectively, our results demonstrate that site-specific S-palmitoylation of IFITM3 directly alters its biophysical properties and activity in cells to prevent virus infection.