Rubella virus is an enveloped positive-strand RNA virus of the family TOGAVIRIDAE: Virions are composed of three structural proteins: a capsid and two membrane-spanning glycoproteins, E2 and E1. During virus assembly, the capsid interacts with genomic RNA to form nucleocapsids. In the present study, we have investigated the role of capsid phosphorylation in virus replication. We have identified a single serine residue within the RNA binding region that is required for normal phosphorylation of this protein. The importance of capsid phosphorylation in virus replication was demonstrated by the fact that recombinant viruses encoding hypophosphorylated capsids replicated at much lower titers and were less cytopathic than wild-type virus. Nonphosphorylated mutant capsid proteins exhibited higher affinities for viral RNA than wild-type phosphorylated capsids. Capsid protein isolated from wild-type strain virions bound viral RNA more efficiently than cell-associated capsid. However, the RNA-binding activity of cell-associated capsids increased dramatically after treatment with phosphatase, suggesting that the capsid is dephosphorylated during virus assembly. In vitro assays indicate that the capsid may be a substrate for protein phosphatase 1A. As capsid is heavily phosphorylated under conditions where virus assembly does not occur, we propose that phosphorylation serves to negatively regulate binding of viral genomic RNA. This may delay the initiation of nucleocapsid assembly until sufficient amounts of virus glycoproteins accumulate at the budding site and/or prevent nonspecific binding to cellular RNA when levels of genomic RNA are low. It follows that at a late stage in replication, the capsid may undergo dephosphorylation before nucleocapsid assembly occurs.