In mammalian cells, widespread acceleration of cytoplasmic mRNA degradation is linked to impaired RNA polymerase II (Pol II) transcription. This mRNA decay-induced transcriptional repression occurs during infection with gammaherpesviruses including Kaposi's sarcoma-associated herpesvirus (KSHV) and murine gammaherpesvirus 68 (MHV68), which encode an mRNA endonuclease that initiates widespread RNA decay. Here, we show that MHV68-induced mRNA decay leads to a genome-wide reduction of Pol II occupancy at mammalian promoters. This reduced Pol II occupancy is accompanied by down-regulation of multiple Pol II subunits and TFIIB in the nucleus of infected cells, as revealed by mass spectrometry-based global measurements of protein abundance. Viral genes, despite the fact that they require Pol II for transcription, escape transcriptional repression. Protection is not governed by viral promoter sequences; instead, location on the viral genome is both necessary and sufficient to escape the transcriptional repression effects of mRNA decay. We propose a model in which the ability to escape from transcriptional repression is linked to the localization of viral DNA within replication compartments, providing a means for these viruses to counteract decay-induced transcript loss.