Virus-encoded microRNAs (miRNAs) target viral and host mRNAs to repress protein production from viral and host genes, and regulate viral persistence, cell transformation, and evasion of the immune system. The present study demonstrated that simian virus 40 (SV40)-encoded miRNA miR-S1 targets a cellular miRNA miR-1266 to derepress their respective target proteins, namely, T antigens (Tags) and telomerase reverse transcriptase (TERT). An in silico search for cellular miRNAs to interact with viral miR-S1 yielded nine potential miRNAs, five of which, including miR-1266, were found to interact with miR-S1 in dual-luciferase tests employing reporter plasmids containing the miRNA sequences with miR-S1. Intracellular bindings of miR-1266 to miR-S1 were also verified by the pull-down assay. These miRNAs were recruited into the Ago2-associated RNA-induced silencing complex. Intracellular coexpression of miR-S1 with miR-1266 abrogated the downregulation of TERT and decrease in telomerase activity induced by miR-1266. These effects of miR-S1 were also observed in miR-1266-expressing A549 cells infected with SV40. Moreover, the infected cells contained more Tag, replicated more viral DNA, and released more viral particles than control A549 cells infected with SV40, indicating that miR-S1-induced Tag downregulation was antagonized by miR-1266. Collectively, the present results revealed an interplay of viral and cellular miRNAs to sequester each other from their respective targets. This is a novel mechanism for viruses to manipulate the expression of viral and cellular proteins, contributing to not only viral lytic and latent replication but also cell transformation observed in viral infectious diseases including oncogenesis.