Arenaviruses form a noncytolytic infection in their rodent hosts, yet can elicit severe hemorrhagic disease in humans. How arenaviruses regulate gene expression remains unclear, and further understanding may provide insight into the dichotomy of these disparate infection processes. Here we reconstitute arenavirus RNA synthesis initiation and gene expression regulation in vitro using purified components and demonstrate a direct role of the viral Z protein in controlling RNA synthesis. Our data reveal that Z forms a species-specific complex with the viral polymerase (L) and inhibits RNA synthesis initiation by impairing L catalytic activity. This Z-L complex locks the viral polymerase in a promoter-bound, catalytically inactive state and may additionally ensure polymerase packaging during virion maturation. Z modulates host factors involved in cellular translation, proliferation, and antiviral signaling. Our data defines an additional role in governing viral RNA synthesis, revealing Z as the center of a network of host and viral connections that regulates viral gene expression.