Long interspersed nuclear element 1 is an autonomous non-long terminal repeat retrotransposon that comprises ∼17% of the human genome. Its spontaneous retrotransposition and the accumulation of heritable L1 insertions can potentially result in genome instability and sporadic disorders. Moloney leukemia virus 10 homolog (MOV10), a putative RNA helicase, has been implicated in inhibiting L1 replication, although its underlying mechanism of action remains obscure. Moreover, the physiological relevance of MOV10-mediated L1 regulation in human disease has not yet been examined. Using a proteomic approach, we identified RNASEH2 as a binding partner of MOV10. We show that MOV10 interacts with RNASEH2, and their interplay is crucial for restricting L1 retrotransposition. RNASEH2 and MOV10 co-localize in the nucleus, and RNASEH2 binds to L1 RNAs in a MOV10-dependent manner. Small hairpin RNA-mediated depletion of either RNASEH2A or MOV10 results in an accumulation of L1-specific RNA-DNA hybrids, suggesting they contribute to prevent formation of vital L1 heteroduplexes during retrotransposition. Furthermore, we show that RNASEH2-MOV10-mediated L1 restriction downregulates expression of the rheumatoid arthritis-associated inflammatory cytokines and matrix-degrading proteinases in synovial cells, implicating a potential causal relationship between them and disease development in terms of disease predisposition.