ISG15 is a ubiquitin-like modifier that also functions extracellularly, signaling through the LFA-1 integrin to promote interferon (IFN)-γ release from natural killer (NK) and T cells. The signals that lead to the production of extracellular ISG15 and the relationship between its two core functions remain unclear. We show that both epithelial cells and lymphocytes can secrete ISG15, which then signals in either an autocrine or paracrine manner to LFA-1-expressing cells. Microbial pathogens and Toll-like receptor (TLR) agonists result in both IFN-β-dependent and -independent secretion of ISG15, and residues required for ISG15 secretion are mapped. Intracellular ISGylation inhibits secretion, and viral effector proteins, influenza B NS1, and viral de-ISGylases, including SARS-CoV-2 PL^pro, have opposing effects on secretion of ISG15. These results establish extracellular ISG15 as a cytokine-like protein that bridges early innate and IFN-γ-dependent immune responses, and indicate that pathogens have evolved to differentially inhibit the intracellular and extracellular functions of ISG15.