Interferon gamma (IFN-γ) is an essential mediator of host defense against intracellular pathogens, including the protozoan parasite Toxoplasma gondii. However, prior T. gondii infection blocks IFN-γ-dependent gene transcription, despite the downstream transcriptional activator STAT1 being activated and bound to cognate nuclear promoters. We identify the parasite effector that blocks STAT1-dependent transcription and show it is associated with recruitment of the Mi-2 nucleosome remodeling and deacetylase (NuRD) complex, a chromatin-modifying repressor. This secreted effector, toxoplasma inhibitor of STAT1-dependent transcription (TgIST), translocates to the host cell nucleus, where it recruits Mi-2/NuRD to STAT1-dependent promoters, resulting in altered chromatin and blocked transcription. TgIST is conserved across strains, underlying their shared ability to block IFN-γ-dependent transcription. TgIST deletion results in increased parasite clearance in IFN-γ-activated cells and reduced mouse virulence, which is restored in IFN-γ-receptor-deficient mice. These findings demonstrate the importance of both IFN-γ responses and the ability of pathogens to counteract these defenses.