Background: Double-stranded RNA dependent protein kinase (PKR) is a key regulator of the anti-viral innate immune response in mammalian cells. PKR activity is regulated by a 58 kilo Dalton cellular inhibitor (P58IPK), which is present in inactive state as a complex with Hsp40 under normal conditions. In case of influenza A virus (IAV) infection, P58IPK is known to dissociate from Hsp40 and inhibit PKR activation. However the influenza virus component responsible for PKR inhibition through P58IPK activation was hitherto unknown. Principal Findings: Human heat shock 40 protein (Hsp40) was identified as an interacting partner of Influenza A virus nucleoprotein (IAV NP) using a yeast two-hybrid screen. This interaction was confirmed by co-immunoprecipitation studies from mammalian cells transfected with IAV NP expressing plasmid. Further, the IAV NP-Hsp40 interaction was validated in mammalian cells infected with various seasonal and pandemic strains of influenza viruses. Cellular localization studies showed that NP and Hsp40 co-localize primarily in the nucleus. During IAV infection in mammalian cells, expression of NP coincided with the dissociation of P58IPK from Hsp40 and decrease PKR phosphorylation. We observed that, plasmid based expression of NP in mammalian cells leads to decrease in PKR phosphorylation. Furthermore, inhibition of NP expression during influenza virus replication led to PKR activation and concomitant increase in eIF2α phosphorylation. Inhibition of NP expression also led to reduced IRF3 phosphorylation, enhanced IFN β production and concomitant reduction of virus replication. Taken together our data suggest that NP is the viral factor responsible for P58IPK activation and subsequent inhibition of PKR-mediated host response during IAV infection. Significance: Our findings demonstrate a novel role of IAV NP in inhibiting PKR-mediated anti-viral host response and help us understand P58IPK mediated inhibition of PKR activity during IAV infection.