Poxviruses are large DNA viruses that replicate in the cytoplasm of infected cells. Myxoma virus is a rabbit poxvirus that belongs to the Leporipoxvirus genus. It causes a lethal disease called myxomatosis in European rabbits but cannot sustain any detectable infection in nonlagomorphs. Vaccinia virus is a prototypal orthopoxvirus that was used as a vaccine to eradicate smallpox. Myxoma virus is nonpathogenic in mice, whereas systemic infection with vaccinia virus can be lethal even in immunocompetent mice. Plasmacytoid dendritic cells (pDCs) are potent type I interferon (IFN)-producing cells that play important roles in antiviral innate immunity. How poxviruses are sensed by pDCs to induce type I IFN production is not well understood. Here we report that infection of primary murine pDCs with myxoma virus, but not with vaccinia virus, induces IFN-alpha, IFN-beta, tumor necrosis factor (TNF), and interleukin-12p70 (IL-12p70) production. Using pDCs derived from genetic knockout mice, we show that the myxoma virus-induced innate immune response requires the endosomal DNA sensor TLR9 and its adaptor MyD88, transcription factors IRF5 and IRF7, and the type I IFN positive-feedback loop mediated by IFNAR1. It is independent of the cytoplasmic RNA sensing pathway mediated by the mitochondrial adaptor molecule MAVS, the TLR3 adaptor TRIF, or the transcription factor IRF3. Using pharmacological inhibitors, we demonstrate that myxoma virus-induced type I IFN and IL-12p70 production in murine pDCs is also dependent on phosphatidylinositol 3-kinase (PI3K) and Akt. Furthermore, our results reveal that the N-terminal Z-DNA/RNA binding domain of vaccinia virulence factor E3, which is missing in the orthologous M029 protein expressed by myxoma virus, plays an inhibitory role in poxvirus sensing and innate cytokine production by murine pDCs.