The murine cytomegalovirus-encoded protein m157 is a cognate ligand for both inhibitory and activating receptors expressed by natural killer cells. Additionally, m157 is expressed on the surface of infected cells by a glycophosphatidylinositol (GPI) anchor. Although endogenous GPI-anchored proteins are known to be ligands for the NK cell receptor, NKG2D, the contribution of the GPI anchor for viral m157 ligand function is unknown. To determine whether the GPI anchor for m157 is dispensable for m157 function, we generated m157 variants expressed as transmembrane fusion proteins and tested cells expressing transmembrane m157 for the capacity to activate cognate Ly49 receptors. We found that the GPI anchor is required for high-level cell surface expression of m157, and that the transmembrane m157 ligand retains the capacity to activate reporter cells and NK cells expressing Ly49H, as well as Ly49I129 reporter cells, but with reduced potency. Importantly, target cells expressing the transmembrane form of m157 were killed less efficiently and failed to mediate Ly49H receptor downregulation on fresh NK cells compared to targets expressing GPI-anchored m157. Taken together, these results show that the GPI anchor for m157 facilitates robust cell surface expression, and that NK cells are sensitive to the altered cell surface expression of this potent viral evasin.