In order to improve vaccine effectiveness and safety profile of existing synthetic RNA-based vaccines, we have developed a self-amplifying RNA (saRNA)-based vaccine expressing membrane-anchored receptor binding domain (RBD) of SARS-CoV-2 S protein (S-RBD) and have demonstrated that a minimal dose of this saRNA vaccine elicits robust immune responses. Results from a recent clinical trial with 5-methylcytidine (5mC) incorporating saRNA vaccine demonstrated reduced vaccine-induced adverse effects while maintaining robust humoral responses. In this study, we investigate the mechanisms accounting for induction of efficient innate and adaptive immune responses and attenuated adverse effects induced by the 5mC-incorporated saRNA. We show that the 5mC-incorporating saRNA platform leads to prolonged and robust expression of antigen, while induction of type-I interferon (IFN-I), a key driver of reactogenicity, is attenuated in peripheral blood mononuclear cells (PBMCs), but not in macrophages and dendritic cells. Interestingly, we find that the major cellular source of IFN-I production in PBMCs is plasmacytoid dendritic cells (pDCs), which is attenuated upon 5mC incorporation in saRNA. In addition, we demonstrate that monocytes also play an important role in amplifying proinflammatory responses. Furthermore, we show that the detection of saRNA is mediated by a host cytosolic RNA sensor, RIG-I. Importantly, 5mC-incorporating saRNA vaccine candidate produced robust IgG responses against S-RBD upon injection in mice, thus providing strong support for the potential clinical use of 5mC-incorporating saRNA vaccines.