Kaposi's sarcoma-associated herpesvirus (KSHV) is the cause of Kaposi's sarcoma and body cavity lymphomas. KSHV lytic infection produces PAN RNA, a highly abundant noncoding polyadenylated transcript that is retained in the nucleus. We recently demonstrated that PAN RNA interacts with several viral and cellular factors and can disregulate the expression of genes that modulate immune response. In an effort to define the role of PAN RNA in the context of the virus genome we generated a recombinant BACmid that deleted the PAN RNA locus. Because of the apparent duplication of the PAN RNA locus in BAC36, we generated BAC36CR, a recombinant BACmid that removes the duplicated region. BAC36CR was used as a template to delete most of the PAN RNA locus to generate BAC36CRΔPAN. BAC36CRΔPAN failed to produce supernatant virus and displayed a general decrease in mRNA accumulation of representative immediate early, early and late genes. Most strikingly, K-Rta expression was decreased in lytically induced BAC36CRΔPAN-containing cell lines at early and late time points post induction. Expression of PAN RNA in trans in BAC36CRΔPAN containing cells resulted in an increase in K-Rta expression, however K-Rta over expression failed to rescue BAC36CRΔPAN, suggesting that PAN RNA plays a wider role in virus replication. To investigate the role of PAN RNA in the activation of K-Rta expression, we demonstrate that PAN RNA physically interacts with the ORF50 promoter. RNA chromatin immunoprecipitation assays show that PAN RNA interacts with demethylases JMJD3 and UTX, and the histone methyltransferase MLL2. Consistent with the interaction with demethylases, expression of PAN RNA results in a decrease of the repressive H3K27me3 mark at the ORF50 promoter. These data support a model where PAN RNA is a multifunctional regulatory transcript that controls KSHV gene expression by mediating the modification of chromatin by targeting the KSHV repressed genome.