Arenaviruses cause severe hemorrhagic fever diseases in humans, and there are limited preventative and therapeutic measures against these diseases. Previous structural and functional analyses of arenavirus nucleoproteins (NPs) revealed a conserved DEDDH exoribonuclease (RNase) domain that is important for type I interferon (IFN) suppression, but the biological roles of the NP RNase in viral replication and host immune suppression have not been well characterized. Infection of guinea pigs with Pichinde virus (PICV), a prototype arenavirus, can serve as a surrogate small animal model for arenavirus hemorrhagic fevers. In this report, we show that mutation of each of the five RNase catalytic residues of PICV NP diminishes the IFN suppression activity and slightly reduces the viral RNA replication activity. Recombinant PICVs with RNase catalytic mutations can induce high levels of IFNs and barely grow in IFN-competent A549 cells, in sharp contrast to the wild-type (WT) virus, while in IFNdeficient Vero cells, both WT and mutant viruses can replicate at relatively high levels. Upon infection of guinea pigs, the RNase mutant viruses stimulate strong IFN responses, fail to replicate productively, and can become WT revertants. Serial passages of the RNase mutants in vitro can also generate WT revertants. Thus, the NP RNase function is essential for the innate immune suppression that allows the establishment of a productive early viral infection, and it may be partly involved in the process of viral RNA replication. IMPORTANCE: Arenaviruses, such as Lassa, Lujo, and Machupo viruses, can cause severe and deadly hemorrhagic fever diseases in humans, and there are limited preventative and treatment options against these diseases. Development of broad-spectrum antiviral drugs depends on a better mechanistic understanding of the conserved arenavirus proteins in viral infection. The nucleoprotein (NPs) of all arenaviruses carry a unique exoribonuclease (RNase) domain that has been shown to be critical for the suppression of type I interferons. However, the functional roles of the NP RNase in arenavirus replication and host immune suppression have not been characterized systematically. Using a prototype arenavirus, Pichinde virus (PICV), we characterized the viral growth and innate immune suppression of recombinant RNase-defective mutants in both cell culture and guinea pig models. Our study suggests that the NP RNase plays an essential role in the suppression of host innate immunity, and possibly in viral RNA replication, and that it can serve as a novel target for developing antiviral drugs against arenavirus pathogens.