Latent viruses generally defend their host cell against superinfection by nonlatent virulent mutants that could destroy the host cell. Superinfection inhibition thus seems to be a prerequisite for the maintenance of viral latency. Yet viral latency can break down when resistance to superinfection inhibition, known as ultravirulence, occurs. To understand the evolution of viral latency, we have developed a model that analyzes the epidemiology of latent infection in the face of ultravirulence. We show that latency can be maintained when superinfection inhibition and resistance against it coevolve in an arms race, which can result in large fluctuations in virulence. An example is the coevolution of the virulence and superinfection repressor protein of phage lambda (cI) and its binding target, the lambda oLoR operator. We show that this repressor/operator coevolution is the driving force for the evolution of superinfection immunity groups. Beyond latent phages, we predict analogous dynamics for any latent virus that uses a single repressor for the simultaneous control of virulence and superinfection.