The morbidity and mortality caused by the globally prevalent human respiratory pathogen respiratory syncytial virus (RSV) approaches that world-wide of influenza. We previously demonstrated that the RSV matrix (M) protein shuttles, in signal-dependent fashion, between host cell nucleus and cytoplasm, and that this trafficking is central to RSV replication and assembly. Here we analyze in detail the nuclear role of M for the first time using a range of novel approaches, including quantitative analysis of de novo cell transcription in situ in the presence or absence of RSV infection or M ectopic expression, as well as in situ DNA binding. We show that M, dependent on amino acids 110-183, inhibits host cell transcription in RSV-infected cells as well as cells transfected to express M, with a clear correlation between nuclear levels of M and the degree of transcriptional inhibition. Analysis of bacterially expressed M protein and derivatives thereof mutated in key residues within M's RNA binding domain indicates that M can bind to DNA as well as RNA in a cell-free system. Parallel results for point-mutated M derivatives implicate arginine 170 and lysine 172, in contrast to other basic residues such as lysine 121 and 130, as critically important residues for inhibition of transcription and DNA binding both in situ and in vitro. Importantly, recombinant RSV carrying arginine 170/lysine 172 mutations shows attenuated infectivity in cultured cells and in an animal model, concomitant with altered inflammatory responses. These findings define an RSV M-chromatin interface critical for host transcriptional inhibition in infection, with important implications for anti-RSV therapeutic development.