Inflammasomes are cytoplasmic sensors of foreign molecules, including pathogens, and function to induce caspase-1 activation and IL-1β cytokine maturation. Whether such a mechanism exists in the nucleus and is effective against nuclear replicating pathogens is unknown. Nuclear replicating herpesvirus KSHV is associated with Kaposi Sarcoma, an angioproliferative tumor characterized by an inflammatory microenvironment including IL-1β. We demonstrate that during KSHV infection of endothelial cells, interferon gamma-inducible protein 16 (IFI16) interacts with the adaptor molecule ASC and procaspase-1 to form a functional inflammasome. This complex was initially detected in the nucleus and subsequently in the perinuclear area. KSHV gene expression and/or latent KSHV genome is required for inflammasome activation and IFI16 colocalizes with the KSHV genome in the infected cell nucleus. Caspase-1 activation by KSHV was reduced by IFI16 and ASC silencing. Our studies reveal IFI16 as a nuclear pathogen sensor and demonstrate that the inflammasome also functions in the nucleus.