SARS-associated coronavirus (SARS-CoV) causes inflammation and damage to the lungs resulting in severe acute respiratory syndrome. To evaluate the molecular mechanisms behind this event, we investigated the roles of SARS-CoV proteins in regulation of the proinflammatory factor, cyclooxygenase-2 (COX-2). Individual viral proteins were tested for their abilities to regulate COX-2 gene expression. Results showed that the COX-2 promoter was activated by the nucleocapsid (N) protein in a concentration-dependent manner. Western blot analysis indicated that N protein was sufficient to stimulate the production of COX-2 protein in mammalian cells. COX-2 promoter mutations suggested that activation of COX-2 transcription depended on two regulatory elements, a nuclear factor-kappa B (NF-kappaB) binding site, and a CCAAT/enhancer binding protein (C/EBP) binding site. Electrophoretic mobility shift assay (EMSA) and chromatin immunoprecipitation (ChIP) demonstrated that SARS-CoV N protein bound directly to these regulatory sequences. Protein mutation analysis revealed that a Lys-rich motif of N protein acted as a nuclear localization signal and was essential for the activation of COX-2. In addition, a Leu-rich motif was found to be required for the N protein function. A sequence of 68 residuals was identified as a potential DNA-binding domain essential for activating COX-2 expression. We propose that SARS-CoV N protein causes inflammation of the lungs by activating COX-2 gene expression by binding directly to the promoter resulting in inflammation through multiple COX-2 signaling cascades.