Interferon (IFN) stimulates a whole repertoire of cellular genes, collectively referred to as ISGs (Interferon-stimulated genes). ISG20, a 3´-5´ exonuclease enzyme, has been previously shown to bind and degrade hepatitis B Virus (HBV) transcripts. Here, we show that the N6-methyladenosine (m6A)-modified HBV transcripts are selectively recognized and processed for degradation by ISG20. Moreover, this effect of ISG20 is critically regulated by m6A reader protein, YTHDF2 (YTH-domain family 2). Previously, we identified a unique m6A site within HBV transcripts and confirmed that methylation at nucleotide A1907 regulates HBV lifecycle. In this report, we now show that the methylation at A1907 is a critical regulator of IFN-α mediated decay of HBV RNA. We observed that the HBV RNAs become less sensitive to ISG20 mediated degradation when methyltransferase enzymes or m6A reader protein YTHDF2 are silenced in HBV expressing cells. By using an enzymatically inactive form ISG20D94G, we further demonstrated that ISG20 forms a complex with m6A modified HBV RNA and YTHDF2 protein. Due to terminal redundancy, HBV genomic nucleotide A1907 position is acquired twice by pregenomic RNA (pgRNA) during transcription and therefore the sites of methylation are encoded within 5´ and 3´ epsilon stem loops. We generated HBV mutants that lack m6A site at either one (5´ or 3´) or both the termini (5´& 3´). Using these mutants, we demonstrated that m6A modified HBV RNAs are subjected to ISG20-mediated decay and propose sequence of events, in which ISG20 binds with YTHDF2 and recognizes m6A-modified HBV transcripts to carry out the ribonuclease activity. This is the first study, which identifies a hitherto unknown role of m6A modification of RNA in IFN-α induced viral RNA degradation and proposes a new role of YTHDF2 protein as a cofactor required for IFN-α mediated viral RNA degradation.