Infection by viruses, including herpes simplex virus-1 (HSV-1), and cellular stresses cause widespread disruption of transcription termination (DoTT) of RNA polymerase II (RNAPII) in host genes. However, the underlying mechanisms remain unclear. Here, we demonstrate that the HSV-1 immediate early protein ICP27 induces DoTT by directly binding to the essential mRNA 3' processing factor CPSF. It thereby induces the assembly of a dead-end 3' processing complex, blocking mRNA 3' cleavage. Remarkably, ICP27 also acts as a sequence-dependent activator of mRNA 3' processing for viral and a subset of host transcripts. Our results unravel a bimodal activity of ICP27 that plays a key role in HSV-1-induced host shutoff and identify CPSF as an important factor that mediates regulation of transcription termination. These findings have broad implications for understanding the regulation of transcription termination by other viruses, cellular stress and cancer.