Small interfering RNA (siRNA)-directed gene silencing plays a major role in antiviral defense. Virus-derived siRNAs inhibit viral replication in infected cells and potentially move to neighboring cells, immunizing them from incoming virus. Viruses have evolved various ways to evade and suppress siRNA production or action. Here, we show that 21-, 22-, and 24-nucleotide (nt) viral siRNAs together constitute up to 19% of total small RNA population of Oryza sativa plants infected with Rice tungro bacilliform virus (RTBV) and cover both strands of the RTBV DNA genome. However, viral siRNA hotspots are restricted to a short noncoding region between transcription and reverse-transcription start sites. This region generates double-stranded RNA (dsRNA) precursors of siRNAs and, in pregenomic RNA, forms a stable secondary structure likely inaccessible to siRNA-directed cleavage. In transient assays, RTBV protein P4 suppressed cell-to-cell spread of silencing but enhanced cell-autonomous silencing, which correlated with reduced 21-nt siRNA levels and increased 22-nt siRNA levels. Our findings imply that RTBV generates decoy dsRNA that restricts siRNA production to the structured noncoding region and thereby protects other regions of the viral genome from repressive action of siRNAs, while the viral protein P4 interferes with cell-to-cell spread of antiviral silencing.