The avian leukosis virus subgroup J (ALV-J) belongs to the chicken retrovirus that causes enormous economic losses in the poultry industry. Interferon-stimulated genes (ISGs) are critical for controlling virus infections. Here, we identified 897 type I ISGs induced by interferon-α (IFN-α) in chicken peripheral blood mononuclear cell (PBMC) by RNA-Seq. In addition, we further identified 152 potential anti-ALV-J chicken type I ISGs. Among these potential anti-ALV-J ISGs, chicken cholesterol 25-hydroxylase (chCH25H) was selected for further antiviral mechanism studies in chicken embryo fibroblast cell lines (DF1). The gene chCH25H is located on chromosome 6 and clustered in a distinct group with mammals CH25H in the phylogenetic tree. The core promoter region of chCH25H was located within -75/-1 sequence. We found that chCH25H was induced by chicken IFN-α and ALV-J in DF1 cells. The overexpression of chCH25H significantly inhibited ALV-J replication in DF1 cells at 48 h post infection (hpi). In addition, ALV-J replication was significantly enhanced in the chCH25H- knockout DF1 cells. Furthermore, we demonstrated that chCH25H restricted ALV-J infection through the production of 25-hydroxycholesterol (25HC), rather than type I and II interferon. Our results identified 152 potential anti-ALV-J chicken type I ISGs and revealed that 25HC, the product of chCH25H, could be used as a natural antiviral agent to control ALV-J infection.