Kaposi's sarcoma (KS) caused by oncogenic Kaposi's sarcoma-associated herpesvirus (KSHV) is a highly angiogenic and invasive vascular tumor and the most common AIDS-associated cancer. KSHV-encoded viral interleukin-6 (vIL-6) is implicated in the development of KSHV-induced malignancies; however, the mechanisms underlying vIL-6-induced angiogenesis and tumorigenesis remain undefined. Here, we show that vIL-6 promotes angiogenesis, cell proliferation, and invasion by downregulating caveolin 1 (CAV1) that plays a pivotal and versatile role in multiple cancer-associated processes. Mechanistically, vIL-6 signaling led to the phosphorylation and acetylation of STAT3 that targeted DNA methyltransferase 1 (DNMT1) in a sequential manner. Specifically, the vIL-6-induced phosphorylated form of STAT3 transcriptionally activated DNMT1 expression. Furthermore, vIL-6-induced acetylated form of STAT3 interacted with DNMT1 to form a transcription factor complex that bound to and methylated the CAV1 promoter, leading to CAV1 expression silencing. In fact, downregulation of CAV1 expression resulted in the activation of AKT signaling, promoting cell invasion, and growth transformation induced by KSHV. Finally, genetic deletion of vIL-6 from the KSHV genome abolished KSHV-induced cellular transformation and impaired angiogenesis. Our results reveal that vIL-6 epigenetically silences CAV1 expression to promote angiogenesis and tumorigenesis by regulating the formation of STAT3-DNMT1 complex. These novel findings define a mechanism by which KSHV inhibits the CAV1 pathway and establish the scientific basis for targeting this pathway to treat KSHV-associated cancers.