Major gaps in our knowledge of pathogen genes and how these gene products interact with host gene products to cause disease represent a major obstacle to progress in vaccine and antiviral drug development for the herpesviruses. To begin to bridge these gaps, we conducted a dual analysis of Murine Cytomegalovirus (MCMV) and host cell transcriptomes during lytic infection. We analyzed the MCMV transcriptome during lytic infection using both classical cDNA cloning and sequencing of viral transcripts and next generation sequencing of transcripts (RNA-Seq). We also investigated the host transcriptome using RNA-Seq combined with differential gene expression analysis, biological pathway analysis, and gene ontology analysis. We identify numerous novel spliced and unspliced transcripts of MCMV. Unexpectedly, the most abundantly transcribed viral genes are of unknown function. We found that the most abundant viral transcript, recently identified as a noncoding RNA regulating cellular microRNAs, also codes for a novel protein. To our knowledge, this is the first viral transcript that functions both as a noncoding RNA and an mRNA. We also report that lytic infection elicits a profound cellular response in fibroblasts. Highly upregulated and induced host genes included those involved in inflammation and immunity, but also many unexpected transcription factors and host genes related to development and differentiation. Many top downregulated and repressed genes are associated with functions whose roles in infection are obscure, including host long intergenic noncoding RNAs, antisense RNAs or small nucleolar RNAs. Correspondingly, many differentially expressed genes cluster in biological pathways that may shed new light on cytomegalovirus pathogenesis. Together, these findings provide new insights into the molecular warfare at the virus-host interface and suggest new areas of research to advance the understanding and treatment of cytomegalovirus-associated diseases.